What is a reimbursable expense?

What is a reimbursable expense?

A reimbursable expense is any ordinary and necessary cost incurred on behalf of a business that the company agrees to repay. These expenses are typically outlined in a company’s expense or reimbursement policy and must be directly related to business activities. To qualify, expenses usually need to be reasonable, properly documented, and submitted within a specified timeframe.

How to categorize reimbursable expenses

• Record reimbursed amounts under the appropriate expense category (e.g., Travel, Meals, Office Supplies), not payroll.
• Use an “Employee Reimbursements” or clearing account temporarily if needed before categorizing.
• Require itemized receipts and clear business purpose for each expense.
• Follow a written reimbursement policy that defines eligible expenses and limits.
• Reimburse only reasonable and business-related costs to remain compliant with tax rules.

Examples of reimbursable expenses

• Business travel costs such as airfare, lodging, and ground transportation.
• Meals purchased during business trips or client meetings (subject to company policy).
• Mileage or fuel for personal vehicles used for work purposes.
• Office supplies or equipment purchased for business use.
• Conference, training, or certification fees.
• Internet or phone expenses when used for work (fully or partially, if allowed).
• Client entertainment or business-related events, if permitted.

Tax implications for reimbursable expenses

• Reimbursements under an accountable plan are not taxable to employees.
• Expenses must have a clear business purpose and be substantiated.
• Non-accountable plan reimbursements may be treated as taxable income.
• Businesses can deduct reimbursable expenses as ordinary business expenses.
• Poor documentation or overly generous reimbursements may trigger audits or reclassification as wages.