Mileage reimbursement guide for 2025: IRS rates, rules, and how to track

Mileage reimbursement compensates employees for business use of their personal vehicles. Many businesses include it in their expense reimbursement policy and factor it into their overall expense management strategy.

Here, we provide an overview of mileage reimbursement, the 2025 IRS mileage rates, key compliance rules to follow, and practical tips to help simplify mileage reimbursement.

What is mileage reimbursement?

Mileage reimbursement is the process of repaying employees, contractors, or self-employed individuals for using their personal vehicles for business-related travel. It helps cover vehicle expenses such as gas, maintenance, and wear and tear when driving for work purposes. However, it doesn’t apply to commuting between home and your regular workplace.

For jobs that require extensive driving, mileage reimbursement can serve as 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 your employees incur on each trip.

Mileage reimbursement amounts are typically tax-deductible, so the 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 you can choose whatever rate you believe is appropriate.

What is the standard mileage rate?

The IRS standard mileage rate is the dollar amount that business owners or self-employed individuals can deduct from their income tax return for each business mile driven. The rate can vary depending on the nature of the business use, with separate rates for standard business, charitable, medical, or moving purposes.

For the 2025 tax year, the rates are:

• Business: 70 cents per mile
• Medical/moving: 21 cents per mile
• Charitable: 14 cents per mile

The IRS updates the standard mileage rate annually to reflect changes in the cost of operating a vehicle, including gas prices, maintenance, insurance, and depreciation. This makes the standard mileage rate an up-to-date and fair benchmark for both tax deductions and employee reimbursements.

Many employers reimburse employees at the IRS standard mileage rate because it simplifies recordkeeping and ensures that reimbursements aren’t treated as taxable income by the IRS. However, businesses are free to set their reimbursement rates above or below the federal benchmark.

What is the current standard mileage reimbursement rate?

As of January 2025, the federal standard mileage reimbursement rate is 70 cents per mile, up from 67 cents in 2024. Here’s a quick look at rates from the past few years:

Medical, charitable, and moving mileage

In addition to the standard business mileage rate, the IRS sets separate mileage rates for other specific purposes:

• Medical mileage: Trips taken for qualified medical care; often deductible as part of medical expenses
• Moving mileage: Active-duty military members relocating to a new duty station
• Charitable mileage: Miles driven while volunteering for a qualified charitable organization

Here’s a breakdown:

While the IRS updates the business and medical/moving rates annually to reflect costs, the charitable mileage rate is set by Congress and rarely changes.

Is mileage reimbursement taxable income?

When you reimburse employees at or below the standard mileage rate (70 cents per mile for 2025), that amount doesn’t count as taxable income. The IRS considers it a tax-free reimbursement of business expenses as long as employees provide proper documentation under an accountable plan.

However, mileage reimbursement can become taxable if your policy pays above the IRS rate, does not require employees to document their mileage, or provides a lump sum without regard to actual business use. These situations fall under a non-accountable plan, and any amount that exceeds the IRS standard is treated as taxable income.

What if you pay above the standard rate?

If your company chooses to reimburse at a rate higher than the IRS standard, the excess amount over the standard rate must be reported on the employee’s W-2 and is subject to income and payroll taxes.

For example, if you reimburse at 75 cents per mile when the IRS rate is 70 cents, the extra 5 cents per mile counts as additional wages for tax purposes. Many employers align their business mileage reimbursement policy with the IRS rate to keep it simple and avoid creating taxable income for employees.

State mileage requirements

Despite the lack of a formal federal law, some states, specifically California, Illinois, and Massachusetts, have laws on the books requiring employers to reimburse employees for business-related use of their personal vehicles. These laws don’t specify an exact reimbursement rate, but most tend to follow the IRS standard mileage rate as a benchmark.

Keep in mind that these state laws are part of broader employee expense reimbursement statutes, which may impose stricter requirements to make sure employees are fully compensated for their expenses.

Make sure your mileage reimbursement rules reflect these regulations if you have employees in these locations. It’s also a good idea to check with your state’s labor department or tax authority for the most up-to-date details on specific requirements.

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 co-worker from the airport to attend a business meeting
• Visiting customers, clients, or prospects for sales meetings
• Transporting materials, equipment, or supplies to or from an 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

Keep in mind that mileage reimbursement doesn’t cover every driving cost. For example, commuting between home and the office is neither reimbursable nor tax-deductible. Similarly, expenses such as tolls or parking fees incurred during business travel should be reimbursed separately as part of your company’s travel expense policy.

Other costs not covered by mileage reimbursement include valet or concierge parking and similar personal services.

Benefits of employee mileage reimbursement

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

• Mileage reimbursements count as a tax-deductible business expense, helping to lower your taxable business income
• Employees may be more willing to drive their personal vehicles when they know they’ll be reimbursed for the costs
• Mileage reimbursement can help with employee attraction and retention, especially for positions where driving is a big part of the job

How to track and manage 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 can 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. For the most accurate estimate, it’s best to record odometer readings before and after the trip, rather than relying solely on map estimates.

How to calculate mileage reimbursement

To calculate a mileage reimbursement, multiply the number of miles driven by the current mileage rate set by your employer or the IRS, whichever applies. Here’s a simple formula to calculate mileage reimbursement:

Business miles driven * Mileage rate = Reimbursement amount

Say you drove 100 miles for business, and your company reimburses mileage at the standard mileage rate. To calculate your reimbursement, you’d multiply the total miles driven (100) by the IRS standard mileage rate for 2025 (70 cents per mile) to calculate your reimbursement:

100 miles * $0.70 per mile = $70.00 reimbursement

Ramp also provides a handy mileage reimbursement calculator you can use on the go.

Handling incorrect mileage logs

Mistakes in mileage logs can happen, but they’re fixable with proper documentation. If an error or dispute arises, ask the employee to provide supporting details, such as:

• Odometer readings
• Receipts or calendar appointments confirming the trip
• Corrected log entries with an explanation

Having clear policies for correcting and resubmitting mileage logs helps prevent confusion and ensures your records are audit-ready.

Common mileage reimbursement mistakes

Businesses often make avoidable errors in their mileage reimbursement processes. Here are some common mistakes and how to avoid them:

• Mixing personal and business miles: Remind employees to log only business-related travel and exclude commuting
• Poor recordkeeping: Require complete, timely mileage logs and keep them organized for tax purposes
• Reimbursing at the wrong rate: Review and update your reimbursement rate annually to reflect the current IRS standard or your company’s chosen rate

You can minimize these mistakes by training employees on your policy, reviewing logs periodically, and using mileage tracking software.

How to create a mileage reimbursement policy

A written mileage reimbursement policy keeps employees informed and ensures your business is compliant with IRS and state requirements. Follow these steps to create an effective policy:

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 such as gas prices and the overall cost of living. Plan to review and update your rate annually to align with IRS updates and company needs.
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 tracking software.
3. Define eligible trips: Specify which types of business travel qualify for reimbursement, such as off-site meetings, client visits, or transporting work-related materials. Remind employees that regular commuting is not reimbursable.
4. 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.

Make mileage reimbursement easy with Ramp

Ramp’s AI-powered 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 available in Canada, Spain, Germany, France, and the United Kingdom.

Ready to learn more? Try an interactive demo to explore Ramp’s automated expense management software.