Reimbursed Drill Travel: Accountable Plans, Code L and What a Reservist Can Still Deduct
Reserve travel can be paid for in three ways: you cover it yourself, the government or your unit pays you back, or someone pays part of it. Each case changes what you can deduct. This guide sorts those cases using the IRS wording, explains why the reservist deduction survived the suspension that ended it for most employees, and works one invented year through four reimbursement scenarios.
What "unreimbursed" means for a reservist
Publication 3 frames the reservist rule around money you spent and did not get back: it says you can deduct unreimbursed travel expenses, counted from the time you leave home until you return. It also says you can no longer claim miscellaneous itemized deductions, a group that used to include the deduction for unreimbursed employee business expenses. The rest of this page is about where the line falls between reimbursed and unreimbursed.
Publication 463 starts from a plain case. If you are paid with the understanding that you will cover your own expenses, you have no reimbursement or allowance arrangement at all, and the reimbursement rules do not apply.
Why the reservist deduction survived the suspension
Publication 463 explains that the suspension of miscellaneous itemized deductions applies to tax years beginning after 2017, and that deductions allowed in figuring adjusted gross income are not suspended. It names Armed Forces reservists among the people who may still deduct unreimbursed employee travel expenses as an adjustment to total income on Schedule 1, line 12. Publication 3 adds that this treatment is not available to active duty service members. Because it is an adjustment to total income rather than an itemized deduction, it does not depend on whether you itemize.
The statutory source is section 62(a)(2)(E), which covers travel expenses figured at no more than the federal travel rates, including per diem, for any period when the reservist is more than 100 miles from home in connection with the service. The federal rate is therefore the ceiling for what you may count, whatever you actually spent.
The three outcomes of a reimbursement
Publication 463 sorts reimbursement arrangements into accountable plans and nonaccountable plans, and the plan type decides how the money shows up on your W-2.
An accountable plan has a business connection requirement and two behavior rules for you: you must adequately account for your expenses within a reasonable period, and you must return any excess within a reasonable period. Publication 463 gives timing that counts as reasonable without argument: an advance within 30 days of the expense, an accounting within 60 days after the expense, and a return of excess within 120 days.
If the plan meets all three rules, the payer should not put the reimbursement in box 1 of your Form W-2. If your expenses equal your reimbursements, you do not complete Form 2106 and you have no deduction, because the money you received matches the money you spent. If box 1 does include reimbursements even though you met every rule, Publication 463 tells you to ask the payer for a corrected W-2.
The second outcome is a nonaccountable plan. Publication 463 says the payer chooses which kind of plan it runs, and you cannot turn a nonaccountable plan into an accountable one by voluntarily accounting for your expenses or returning the excess. Under that kind of plan the payer combines the reimbursement with your wages and reports the total in box 1 of your Form W-2, so the money is taxed and your costs are deductible, if at all, under the reservist rules.
The third outcome is an allowance, a flat amount paid instead of repaying actual costs. If the allowance is at or below the federal rate, it stays out of box 1 and you need not report it or the matching expenses when your costs do not exceed it. If the allowance is above the federal rate, the payer reports the part up to the federal rate under code L in box 12, which is not taxable, and the extra goes into box 1 and is taxed as wages.
When your real costs run past the federal rate, the reservist path opens: you complete Form 2106, report the reimbursements up to the federal rate (the code L amount) and all your expenses, and deduct the difference.
What counts as the federal rate
Publication 463 lists the ways to measure the federal rate. For lodging and meals it can be the regular federal per diem rate, the standard meal allowance or the high-low rate. For car costs it can be the standard mileage rate or a fixed and variable rate. For 2025 the standard mileage rate is 70 cents a mile, and the standard meal allowance for most small localities is $68 a day.
A worked example: one drill year, four reimbursement setups
The reservist below is invented. They make 5 drill trips of 130 miles each way, which is 260 miles round trip and 1,300 miles for the year. They stay one night per trip at $120, assumed to be under the lodging rate for that location. They count the standard meal allowance of $68 a day at three quarters on the first and last day, which is $102 per trip, and meals are limited to 50% when unreimbursed. Mileage is figured at 70 cents. On those facts the unreimbursed costs are:
| Cost | How it is figured | Amount |
|---|---|---|
| Mileage | 1,300 miles at 70 cents | $910.00 |
| Lodging | 5 nights at $120 | $600.00 |
| Meals | 5 trips at $102, then 50% | $255.00 |
| Total if nothing is reimbursed | Sum of the three | $1,765.00 |
Now vary who pays. The table shows the amount that would go from Form 2106, line 10, to Schedule 1, line 12, under each setup, using the Publication 3 and Publication 463 steps above.
| Setup | What the payer does | Deduction | Extra wages |
|---|---|---|---|
| A. No reimbursement | Nothing | $1,765.00 | none |
| B. Lodging repaid in full | Accountable plan repays $600 for nights; stays out of box 1 | $1,165.00 | none |
| C. Mileage allowance of 50 cents | Pays $650 for 1,300 miles, below the federal rate | $1,115.00 | none |
| D. Mileage allowance of 80 cents | Pays $1,040; $910 shown under code L, $130 in box 1 | $855.00 | $130.00 |
Setup D shows the quirk. The allowance beat the federal rate by 10 cents a mile, so $130 became taxable wages, and the other costs (lodging and meals) were still unreimbursed. The reservist reports total expenses of $1,765.00, less the code L amount of $910.00, and deducts $855.00. Whether the $130 of wages could offset anything else is not addressed in the sources reviewed.
The meal limit depends on who paid
Publication 463 says an employee is not subject to the 50% limit on expenses the employer reimburses under an accountable plan, while the limit applies to meals you pay for yourself, even on business travel. The text speaks of employers and employees. Whether a reimbursement on military travel orders is treated the same way is not spelled out in the text we reviewed, so ask your finance office how the payment is reported before you assume either result.
What to collect before you file
- Your W-2, with attention to box 1 and any code L entry in box 12.
- Travel orders or unit paperwork showing what the government paid or agreed to pay for each trip.
- Receipts for lodging and meals, plus a mileage log with dates and distances.
Related guides
- Form 2106, line by line: where the deduction is figured.
- Per diem rates: the lodging and meals figures behind the federal rate.
- Mileage log: the records that support the mileage line.
- Records to keep: how long to hold receipts and orders.
- The 100-mile rule: the distance test that comes first.
Sources
- IRS Publication 3, Armed Forces' Tax Guide
- IRS Publication 463, Travel, Gift, and Car Expenses
- 26 U.S.C. 62, Adjusted gross income defined