Mileage reimbursement guide for 2025: IRS rates, rules, and benefits

Do your employees use their personal vehicles for business or work-related duties? If so, it’s essential to find a way to compensate them for that. It’s critical that any expense reimbursement policy also contains a mileage reimbursement policy so there’s no confusion.

In this article, we provide a quick guide to mileage reimbursement. We cover the standard mileage rate, when reimbursement applies, and answer common questions about employee mileage policies.

What is mileage reimbursement?

Mileage reimbursement is the process for repaying your employees who use their personal vehicles for business purposes. It helps cover car-related expenses like gas, maintenance, wear and tear, and more. For jobs that require a lot of driving, mileage reimbursement is an alternative to providing an employee with a company vehicle or stipend.

You can reimburse employees based on a flat, per-mile rate or reimburse the actual costs employees incur on each trip. Because mileage reimbursement amounts are typically tax-deductible, the Internal Revenue Service (IRS) provides specific guidelines around how companies should log mileage.

The IRS also publishes a standard mileage rate each year as a benchmark. Many employers choose to reimburse employees at the IRS standard mileage rate, but companies can choose whatever rate they deem appropriate.

What is the current mileage reimbursement rate?

As of January 2025, the IRS has determined that the federal standard mileage reimbursement rate is 70 cents per mile. This is up 3 cents from 2024, when it was 67 cents per mile.

Here is the full breakdown:

Understanding the IRS standard mileage rate

As we mentioned, the IRS sets the standard mileage rate every year for the business use of a car, van, pickup, or panel truck. 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.

The mileage rate varies based on the purpose of the travel, with unique rates for standard business use, medical or moving purposes for active-duty military, and miles driven in service of a charitable organization. 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 factors like inflation, the average cost of fuel, and other variables.

‍But your business doesn’t necessarily have to follow the IRS mileage rates. You can set your company’s reimbursement rate however you see fit. You can also choose to forego mileage reimbursements altogether and instead reimburse the actual expenses that your employees incur during business travel.

Regardless of what you decide for your company’s mileage reimbursement rate, it should be included in your travel expenses (T&E) policy.

What counts as reimbursable business mileage?

Any time an employee uses their personal vehicle for business purposes, you should consider reimbursing them for mileage.

Common examples of business travel that may trigger mileage reimbursement include:

• Traveling to an off-site business meeting
• Driving to the airport or train station to catch transportation for a business trip
• Picking up a business partner or coworker from the airport to attend a business meeting
• Visiting customers, clients, or prospects for sales meetings
• Transporting materials, equipment, or supplies to or from the office, worksite, or other location

What does mileage reimbursement cover?

Mileage reimbursement does more than simply pay back the cost of gasoline. Other employee expenses that are typically reflected in mileage reimbursement rates include:

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

It’s important to note that mileage reimbursement doesn’t cover all costs associated with driving. Notably, mileage related to regular commuting is not reimbursable—it’s also non-deductible. Or, if your employee pays a toll while driving, that should, instead, be reimbursed separately as a travel expense.

Vehicle expenses and driving costs that aren’t covered by mileage reimbursement include: parking fees, concierge services, and others.

Is mileage reimbursement taxable income?

When you’re reimbursed at the set rate (70 cents per mile for 2025), that doesn’t count as taxable income by the IRS. However, it could be taxable if your policy is to compensate your team at a higher rate than the standard or via a lump sum. Any amount that exceeds the standard IRS rate per mile will count as an income benefit and is fair game for the IRS come tax season.

What are the rules around mileage reimbursement?

Mileage reimbursement is sometimes required by law. Here is an overview of some laws that may require you to reimburse your employees for company mileage.

Federal laws

As of 2025, there is no federal mileage reimbursement requirement. Under the FLSA, however, employers are legally required to reimburse employees for business expenses if failure to do so would drop their earnings below the federal minimum wage. This includes reimbursement for using a personal vehicle for business purposes.

If your average employee earns well above the minimum wage, this likely isn’t much of a concern. But for companies where the average worker earns at or near the federal minimum wage, you should be certain that your mileage reimbursement policy (or lack thereof) complies with FLSA requirements.

State laws

Despite the lack of a formal federal law, some states—specifically California, Illinois, and Massachusetts—currently have laws on the books requiring mileage reimbursement. These laws don’t specify a required reimbursement rate, but most tend to follow the IRS standard mileage rate as a benchmark.

Make sure your mileage reimbursement rules reflect these regulations if you have employees in these locations.

Benefits of employee mileage reimbursement

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

Your employees will likely be more willing to drive their personal vehicles when they know they’ll be reimbursed for the costs. This empowers your team to act nimbly to jump on opportunities as they pop up—putting in the extra effort to visit a client in person, for example, or touring the facility that manufactures your product.

Mileage reimbursement can even help with employee attraction and retention, especially for positions 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.

And, of course, mileage reimbursement comes with some tax benefits. Specifically, it can offer a tax deduction because mileage reimbursements count as a deductible business expense.

Tracking and managing mileage reimbursement

Several mileage-tracking apps make it easy to record miles driven for personal vs. business purposes. If you prefer to keep things low-tech, you might require your team to maintain a manual mileage log for any business travel.

This logbook should include the trip’s date, business purpose, and the total miles driven. Odometer readings before and after the drive offer the most accurate estimate for miles driven, especially compared to map estimates or other methods.

When it comes to creating and managing your mileage reimbursement policy, you’ll want to consider a few factors:

1. Determine your rate: You can use the standard mileage rate as a baseline, but you’ll want to account for local and regional differences like gas prices and overall cost of living
2. Outline the reimbursement process: As part of your overall expense reimbursement policy, set guidelines for how employees should report mileage, the documentation they must submit as proof, and when and how they’ll be reimbursed. The easiest way to manage this process is with expense management software.
3. Keep accurate records: If you plan to write off mileage reimbursements on your tax returns, you need to keep organized and accurate records of the submitted expenses and the reimbursements you paid. The IRS has specific guidelines around recordkeeping requirements for car expenses.

Mileage reimbursement is easier with Ramp

Ramp’s modern expense management software makes managing your mileage reimbursement policy easy. Run mileage reports, review and approve reimbursement requests, and manage receipts all in one platform.

Beyond the essentials, Ramp also offers:

• On-the-go reimbursement requests: With Ramp’s mobile app, employees can log their mileage expenses and submit expense reports even when they’re out on the road
• Precise mileage calculations: Integrate directly with Google Maps to ensure automatic mileage calculations
• International mileage reimbursements: Working internationally? International mileage reimbursements are currently available in Canada, Spain, Germany, France, and the United Kingdom