Track mileage automatically
Get started
Company Mileage Reimbursement Guide
December 15, 2023 - 5 min read

Company Mileage Reimbursement Guide

Company mileage reimbursement programs can be a great benefit for your employees and a powerful tool for your company. However, if not well-designed, they can also be a hassle and take up a lot of time and effort.

All the mileage tracking, trip logging and reporting can seem like a burden, but there are steps you can take as an employer to make sure your company mileage reimbursement is both streamlined and makes your employees happy.

 

Creating a successful company mileage reimbursement program is actually easier than you might think once you get a clear overview of the rules. This is what we will try to help you with in this guide. For a general overview of mileage reimbursement in the US, you can check out our IRS mileage guide.

Company mileage reimbursement explained 

Company mileage reimbursement is most commonly a cents-per-mile allowance to employees to cover their personal automobile costs incurred as part of their job.

The IRS has set the company mileage reimbursement rate for 2024 at 67 cents per mile. The 2023 mileage rate was 65.5 cents per mile driven for business use.

The official mileage reimbursement rate is advisory, and as a company, you can choose to reimburse employees at a lower or higher rate than the one set by the IRS.

Driversnote

Mileage tracking made easy

Trusted by millions of drivers

Automate your logbook Automate your logbook

Automatic mileage tracking and IRS-compliant reporting.

Get started for free Get started for free

How to calculate mileage reimbursement

Company mileage reimbursement is calculated by multiplying the standard mileage allowance rate (or the alternative rate you are using) by the miles driven over a payment period. Let's say your employee has driven 1000 miles in November 2023. The amount of their reimbursement is $655 (if you use the standard company mileage rate for 2023). However, to do this, your employee must provide proof that they have driven the said miles. The proof normally comes in the form of a business mileage log - a log of all the business and personal trips an employee takes with their personal vehicle.

What does company mileage reimbursement cover? 

Operating a vehicle for business purposes incurs considerably more costs than just gas. The list of expenses that are covered is extensive. Oil, tires, taxes and registration, maintenance, and auto insurance are all included.

Employees’ vehicle costs may be higher than you think - consider the average cost of owning a vehicle in your area. It is possible to provide a higher or lower reimbursement than the standard mileage allowance rate.

You are not obliged to use the IRS mileage rate

It is common for companies to use the standard rate, however, it is not mandatory. The standard rate is recommended by the IRS and may be a perfect fit for your company but you are not obligated to use it.

You may wish to raise your rate if you do business in an area where petrol and tolls are more expensive. If you choose a rate that is higher than the federal rate, however, every additional penny will be taxed as income to the employee.

If you operate in a less expensive area, you may want to consider using a lower rate. The standard mileage rate is calculated using changing national averages and may not be a perfect fit for all areas of the US.

What if the company doesn’t have a mileage reimbursement program?

If employees are not reimbursed for their business-related mileage, they can claim a tax deduction at the IRS mileage rate for each mile they’ve driven for business at tax time.

How is company mileage reimbursement done?

There are a few steps to proper mileage reimbursement. The two most important things your employees should do are proper mileage tracking and providing sufficient records of their business miles.

Tracking business mileage

Employees must provide proof that they have driven the business miles they claim reimbursement for. One way to get that proof is by tracking mileage for each trip with a business mileage tracker. If setting up a mileage reimbursement program is of interest to you then you may want to consider setting a standard way in which everyone in the company tracks their mileage. That way generating mileage records will be quick and seamless. However, you can also leave it entirely up to the employees’ wishes on how to track their mileage.

GPS mileage tracking is common nowadays and part of any modern mileage tracking app out there. Some apps also offer automatic business mileage tracking which can save you and your employees time. Driversnote offers this option through the use of our iBeacon device, which automatically tracks all your business trips.

Records for company mileage reimbursement

The IRS sets the rules for what is considered a compliant mileage record. The mileage log serves as proof for showing the IRS or the employer that employees have driven the miles they claim reimbursement for. The following is what a compliant mileage log must include.

  • The time and date of each journey.
  • The total distance covered (odometer readings can be useful for noting business miles).
  • The destination of each drive.
  • A description of the purpose.

For more information on keeping a mileage log you can check out our mileage guide and for an example of a mileage log, you can try out our free mileage log template.

Driversnote

Mileage tracking made easy

Trusted by millions of drivers

Automate your logbook Automate your logbook

Automatic mileage tracking and IRS-compliant reporting.

Get started for free Get started for free

Reimbursing employees for company mileage

If your employees log their driving, then reimbursement should be a breeze. We will quickly guide you through how reimbursement works if your employees or you are using the Driversnote mileage tracking app.

  1. The first step is to make sure everyone has downloaded the mileage app and gotten a quick setup introduction on the Driversnote help center.
  2. Make sure everyone understands how to track and log their trips
  3. Let’s assume you as the company request a trip report at the end of each month. In that case, the employees could quickly generate a report and share it directly with their supervisor or accountant.
  4. Lastly, the one responsible for reimbursement would approve or reject the reports and reimburse their employees. Employees can get reimbursements in their next paycheck, as a separate check, or through direct deposit into their bank account.

Company mileage reimbursement does not have to be a hassle if you have the right tools. Migrating from paper logbooks to using a mileage app can save your company a lot of time and effort. Feel free to reach out to us at support@driversnote.com and we will help you get started with Driversnote for Teams.

FAQ

No, the mileage reimbursement does not need to pass payroll if it falls within the IRS standard mileage reimbursement rate. However, if the reimbursement surpasses the regular mileage rate, it is considered payment, meaning it then has to go through payroll and is taxable.
FAVR (Fixed and Variable Rate) is a common alternative to mileage allowance in which you pay a fixed amount to cover your employees' fixed costs (leasing, insurance, etc.) and a cents-per-mile rate to cover your employees' other variable costs (gas, maintenance, oil, etc.).
The new standard business mileage rate for 2022 is 58.5 cents per mile driven for business use, up 2.5 cents from the rate for 2021.

Tired of logging mileage by hand?

Effortless. IRS-compliant. Liberating.

Auto-track trips
Classify trips
IRS compliant reports
Latest posts
Automate your mileage logbook
Effortless and compliant mileage tracking
Get started for free Get started for free

Related posts

IRS Mileage Guide
IRS Mileage Guide

January 15, 2024 - 10 min read

Mileage reimbursement in the US — rates and rules for employees, self-employed and employers in the US.

IRS Mileage Rates 2024
IRS Mileage Rates 2024

January 2, 2024 - 2 min read

The standard mileage rate for business will be 67 cents per mile, effective Jan. 1st, 2024 - up 1.5 cents from the 2023 rate of 65.5 cents.

Self-Employed Tax Deductions
Self-Employed Tax Deductions

July 11, 2024 - 5 min read

For the self-employed, every tax deduction counts. Check out the top self-employed tax deductions to reduce what you owe the IRS.