Employee Expense Reimbursement Taxable Income: What You Need to Know

Reimbursable employee expenses are a standard part of many workplace operations. Whether you’re traveling for business, purchasing office supplies, or covering other work-related costs, it’s important to understand how these expenses are treated for tax purposes. This guide explains when expense reimbursements are taxable, how stipends compare, and how to stay compliant with IRS guidelines.

What Are Reimbursable Employee Expenses?

Reimbursable employee expenses are costs incurred by employees in the course of doing their jobs that are repaid by the employer. Common examples include: 

• Business travel (flights, hotels, car rentals) 

• Meals during work trips 

• Mileage driven for work using a personal vehicle 

• Home office equipment 

• Office supplies 

To be considered non-taxable, these reimbursements must follow IRS guidelines under an “accountable plan.” This includes providing receipts, explaining the business purpose, and submitting expenses in a timely manner. 

Are Expense Reimbursements Considered Taxable Income? 

In most cases, reimbursable employee expenses are not considered taxable income when they are part of an accountable plan. That means the employee: 

• Incurred a business-related expense 

• Provided proof (receipts, mileage logs, etc.) and 

• Submitted the expenses within a reasonable time frame

However, if these criteria aren’t met, the IRS may treat the reimbursement as income, which must be reported and taxed accordingly. 

Does reimbursement count as income? Not if it follows accountable plan rules. But if it doesn’t, yes—reimbursements can become taxable. 

When Do Expense Reimbursements Become Taxable? 

Reimbursements become taxable when: 

• The employer does not use an accountable plan 

• Employees do not submit documentation 

• Excess reimbursement is not returned to the employer 

• Stipends are given without requiring proof of purchase 

In these cases, do reimbursements count as income? Yes, and they may need to be reported. 

Understanding Stipends vs. Reimbursements 

Stipends are fixed payments often given to employees to cover anticipated costs, such as remote work expenses or wellness benefits. Because they aren’t tied to a specific expense or require receipts, most stipends are considered taxable income. 

Key differences: 

• Reimbursements: Require proof, typically non-taxable 

• Stipends: No proof required, typically taxable 

Examples of Non-Taxable Employee Reimbursements 

Here are some common scenarios where reimbursements are not taxable under IRS guidelines: 

• Mileage: When properly logged and submitted 

• Travel: Airfare and lodging for approved business trips 

• Meals: Within per diem limits or backed by receipts 

• Supplies: With receipts and business justification 

All of these fall under the accountable plan framework. Still, questions like is reimbursement taxable, is reimbursement income, or does expense reimbursement count as income depend on proper documentation. 

Should Expense Reimbursements Be Reported as Income? 

If your reimbursements are part of an accountable plan, they should not be reported as income. However, if your employer uses a non-accountable plan or provides taxable stipends, these amounts will appear on your W-2 and should be reported on your tax return. 

Common questions include: 

• Should reimbursed expenses be included in 1099-NEC? 

• Should a 1099 include reimbursed expenses? 

• Do I have to claim reimbursements on my taxes? 

• Should travel reimbursement be included on 1099? 

If reimbursements are not under an accountable plan, the answer is often yes. 

How to Report Reimbursed Expenses 

When filing taxes, knowing how to report reimbursed expenses is key. If you’re self-employed or an independent contractor, are reimbursed expenses considered income? Often, yes—especially if you’re receiving flat-rate reimbursements without documentation. 

For self-employed individuals: 

• Self-employed reimbursed expenses often count as income unless backed by expense reports. 

• You may be asking: Can I write off reimbursed expenses? No, if you’ve already been reimbursed. 

• Do you include reimbursed expenses on 1099? Yes, if under a non-accountable plan. 

How to Set Up a Tax-Compliant Reimbursement Policy 

For employers, having a clear and compliant reimbursement policy helps avoid unnecessary tax complications. 

• Follow IRS guidelines for accountable plans 

• Require receipts and documentation 

• Set clear timelines for submission 

• Use expense management software to track and automate processes 

ExpensePoint expense management solutions streamline submission, approval, and documentation of reimbursable expenses—making compliance simple and effective. 

Reimbursements and 1099s: What You Need to Know 

For independent contractors and businesses issuing 1099s, these questions are critical: 

• Do reimbursed expenses go on a 1099? 

• 1099 for reimbursed expenses: When not under accountable plan. 

• Is a reimbursement considered income for independent contractor? Often yes. 

• Do you 1099 for reimbursed expenses? Yes, if treated as income. 

• Reimbursed expenses on 1099 and 1099 expense reimbursement are common audit flags—so keep documentation. 

• Should 1099 include travel reimbursement? Only if it’s taxable. 

Reimbursable employee expenses don’t have to be complicated. By understanding the difference between taxable and non-taxable reimbursements, how stipends work, and the importance of an accountable plan, both employees and employers can stay on the right side of IRS regulations.  

For more help managing expense reporting, discover how ExpensePoint expense report automation can simplify your workflow and help you stay compliant.