As Peter has stated above you will be paying taxes on a portion of your $0.60 per mile, everyone that is viewing the $0.60 per mile as untaxed income would be unhappy when they got their W2.

A few key questions can be answered by the following and the link to the IRS publication.

Hope this helps.

Is my employer supposed to include mileage reimbursement as a part of my gross income on my Form W-2, and do I include it on my return as wages, tips, and salaries?

That depends on whether you were reimbursed under an accountable plan or under a non accountable plan. Generally, an employer will have an accountable plan if it pays business expenses that would otherwise be deductible by the employee, requires the employee to substantiate the expense, and does not permit the employee to keep any reimbursements that exceed expenses. If the employer does not use an accountable plan, mileage reimbursement would be included in your wages on Form W-2. For more information on reimbursements and accountable plans, refer to http://www.irs.gov/pub/irs-pdf/p463.pdf Chapter 6 of Publication 463 (PDF), Travel, Entertainment, Gift, and Car Expenses.

If your mileage reimbursement is included in box 1 on Form W-2, you need to enter that amount on the "wages, salaries, and tips" line of your tax return. If you itemize your deductions on Form 1040, Schedule A (PDF), Itemized Deductions, you may deduct the business transportation expense as an employee business expense, subject to the 2% limitation of adjusted gross income. You may usually deduct either your actual business automobile expenses or use the standard mileage rate. For more information on when you may use the standard mileage rate, refer to http://www.irs.gov/pub/irs-pdf/p463.pdf Chapter 4 of Publication 463 (PDF), Travel, Entertainment, Gift, and Car Expenses.