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If your employees use their personal vehicles for business or to carry out work-related duties, it’s important to have a plan in place to make sure they’re appropriately compensated. Having a clear mileage reimbursement policy in place, as a part of your broader expense reimbursement policy, is critical for modern businesses. 

Below, we take a closer look at mileage reimbursement and why it’s so important for your business. We also discuss when reimbursement makes sense and when it doesn’t, review the standard mileage rate, and answer other common questions business owners often have about employee mileage reimbursement.

What is mileage reimbursement?

Mileage reimbursement is when a company reimburses an employee who used their personal vehicle (car, van, truck, etc.) for business use. It typically takes the form of a flat, per-mile rate—often, but not always, matching the standard mileage rate set by the Internal Revenue Service (IRS) each year.

In instances where driving is a big part of the job, mileage reimbursement is an alternative to providing an employee with a company car or fixed amount (stipend) to act as a car allowance.  

What does mileage reimbursement include?

Mileage reimbursement does more than simply cover the cost of gasoline your employee used while driving their vehicle. That’s a part of it, yes—but just a small part. Other employee expenses that are typically reflected in mileage reimbursement rates include those related expenses like:

  • Alternative fuels (ethanol, electricity, natural gas, etc.) 
  • Maintenance (oil, tires, etc.)
  • Washing and cleaning 
  • Wear and tear
  • Depreciation
  • Car insurance 
  • Registration
  • Licensing fees
  • and more

It’s important to note that mileage reimbursement doesn’t cover all costs associated with driving. If your employee pays a toll while driving, for example, that won’t be reflected in their mileage reimbursement. Instead, it would need to be reimbursed separately as a travel expense. Employees should be encouraged to collect and submit receipts along with any reimbursement requests.

Other vehicle expenses and driving costs not covered by mileage reimbursement include parking fees, concierge service, and more.

When should you reimburse employee mileage?

Any time an employee uses their personal vehicle for business purposes, you should consider reimbursing them for the mileage. Some common examples of business travel that may trigger mileage reimbursement include:

  • An employee using their personal vehicle to attend an off-site (i.e., out of office) business meeting
  • An employee driving their personal vehicle to the airport or train station, to then go on a business trip
  • An employee using their personal vehicle to pick up a business partner or coworker from the airport, to attend a business meeting
  • A salesperson driving their personal vehicle to visit customers, clients, or prospects
  • A worker using their personal vehicle to transport materials, equipment, or supplies to or from the office, worksite, or other location

That being said, not all mileage is reimbursable. Mileage related to regular commuting, for example, is usually not reimbursable. (It’s also non-deductible.)

Standard Mileage Rate

Every year, the IRS sets the standard mileage rate. This is the dollar amount that a business owner or self-employed individual can deduct from their income tax return for each business mile driven, effectively lowering their taxable income for the year. Most businesses use the standard mileage rate as a benchmark for setting their own mileage reimbursement policies.

The standard mileage reimbursement rate fluctuates from year to year based on a number of factors, including inflation, the average cost of fuel, and other variable costs. Mid-year adjustments occasionally occur, as seen in 2022 (below). The chart below shows the standard rate for each of the past several years:

Year IRS Standard Mileage Rate
2024 67 cents per mile
2023 65.5 cents per mile
2022 (July-December) 62.5 cents per mile
2022 (January-June) 58.5 cents per mile
2021 56 cents per mile
2020 57.5 cents per mile

Does a business have to follow the IRS mileage rates? No. You’re free to set your company’s reimbursement rate however you see fit—whether that’s more or less than the standard rate. You can also choose to forgo mileage reimbursements altogether if you wish, and instead reimburse the actual expenses that your employees incur during business travel.

That being said, if you reimburse at a higher rate, the difference is considered taxable income for your employee. If you pay under the standard rate, you risk dropping your employee’s pay below the federal minimum wage.

Whatever your company’s mileage reimbursement rate, it should be outlined in an official mileage reimbursement policy as a part of your travel expenses (T&E) policy.

What is the current mileage reimbursement rate for 2024?

The standard reimbursement rate for 2024 is currently set to 67 cents per mile, which is 1.5 cents higher than it was for 2023, when it stood at 65.5 cents per mile.

Looking ahead, the IRS is likely to announce the standard rate for the 2025 tax year in December of this year. This rate is used to calculate mileage reimbursement by multiplying it by the number of business miles driven.

Is mileage reimbursement required?

Mileage reimbursement is sometimes, but not always, required. Below is an overview of some of the laws in place that may require you to reimburse your employees for company mileage.

Federal laws

As of 2024, there is no federal requirement or regulation that requires employers to reimburse mileage in every instance. 

Under the Fair Labor Standards Act (FLSA), however, employers are legally required to reimburse employees for company miles driven in their personal vehicle if failure to do so would drop the employee’s salary below the federal minimum wage. For businesses where the average employee earns well above the minimum wage, this may not be much of a concern; but for businesses where the average worker earns at (or near) the minimum wage, it can be. 

State laws

Despite the lack of federal law, a number of states—specifically Massachusetts, California, and Illinois—currently have laws on the books requiring mileage reimbursement. While these laws do not specify a required rate of reimbursement, most tend to follow the IRS standard rate as a guideline.

Benefits of employee mileage reimbursement

Even when it’s not required, reimbursing mileage can benefit your business.

First, consider that employees are more likely to be willing to drive and travel on the job when they know that they’re going to be reimbursed for the costs. This empowers your employees and your business to act nimbly to jump on opportunities when they present themselves—putting in the extra effort to visit a client face-to-face, for example, or touring the production facility that will be manufacturing your product.

Mileage reimbursement can even help with employee attraction and retention, especially for jobs where driving is a big part of the job. In this way, reimbursements can serve as a more cost-effective alternative to providing an employee with a company car or car allowance.

Finally, as noted above, mileage reimbursement comes with some tax benefits. Specifically, it can provide your business with a tax deduction, as it counts toward deductible business expenses.

How to track employee mileage

If you prefer to keep things low-tech, you might require your employees to keep a mileage log for any business travel manually. This logbook should include the number of miles driven, and the trip's date and business purpose. Odometer readings before and after the drive offer the most accurate estimate for miles driven, especially compared to map estimates or other methods.

Alternatively, there are a number of mileage-tracking apps on the market that make it easy to keep track of miles driven for personal vs. business purposes. 

Mileage reimbursement made easy

With Ramp’s expense management software, running mileage reports, reviewing and approving reimbursement requests, and managing your entire reimbursement program has never been easier. 

Some of the other great features you can expect include:

  • On-the-go reimbursement requests: With our mobile app, employees don’t need to wait until they’re back in the office to submit a reimbursement request—they can log their mileage expenses and request reimbursement even when they’re out on the road. 
  • Precise mileage calculations: Integrate directly with Google Maps to ensure automatic mileage calculations, putting an end to over-reimbursing. 
  • International mileage reimbursements: Got an international workforce? International mileage reimbursements are currently available in Canada, Spain, Germany, France, and the United Kingdom. 
Try Ramp for free
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Contributor Finance Writer
Tim Stobierski is a writer and content strategist focused on the world of finance, investing, software, and other complicated topics. His friends know him as a bit of a nerd. On the side, he writes poetry; his first book of poems, Dancehall, was published by Antrim House Books in July 2023.
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