Your Guide to IRS Mileage Reimbursement
Welcome to our guide to mileage reimbursement In the USA. Here, you'll find an overview of important information that will help you navigate the rules of mileage reimbursement at the workplace and deducting mileage as self-employed. We'll provide you with concise answers, without neglecting the important details.
What is mileage reimbursement?
Mileage reimbursement is the compensation you receive for using your personal vehicle for business purposes. The IRS mileage reimbursement covers the use of specific vehicles, namely: cars, vans, pickups, and panel trucks. Mileage reimbursement is normally calculated on a per-mile basis and covers all expenses of owning and running your vehicle for the business portion of its use.
Employees usually receive mileage reimbursement from employers. Self-employed and independent contractors can deduct business mileage expenses from their taxes, and employers who provide mileage reimbursements to employees can account for these as business expenses.
What is the federal mileage reimbursement rate?
The 2024 mileage reimbursement rate for business-related driving is 67 cents per mile. The medical and moving mileage rate is 21 cents per mile, and the charity mileage rate is 14 cents per mile.
The 2023 mileage reimbursement rate for business was 65.5 cents per mile, 22 cents for medical and moving miles, and 14 cents for miles in the service of charitable organizations.
What is considered business mileage?
You can only receive mileage reimbursement for miles you've traveled for business purposes. The IRS defines business mileage as mileage that is driven between two places of work, permanent or temporary.
The types of trips that are considered business-related are:
- Traveling between your main job and a temporary work location
- Traveling directly from your main job to a second job
- Traveling between a temporary work location and your second job
- Getting from your home to a temporary workplace if your regular job is at another location
Trips that ARE NOT considered business-related are:
- Traveling between your home and your main job
- Traveling between your home and your second job
You may wonder what the difference is between a regular job location, a temporary work location and a second job location. In brief, a regular job location is the main place of business of the company you have or the company that employs you. A temporary work location is one where you are assigned to work for a year or less away from your regular job location. A second job location is another place (with the same or different employer) where you work on the same day as your main job.
For some practical examples of what mileage is reimbursable, consider the following business travel situations:
- Driving from your main office to a secondary office of your firm.
- Visiting clients from your office to their workplace.
- Running work-related errands from your office to a supply store, the post office, or a governmental entity.
- Travel from your home to a secondary office of your employer if you have been assigned to work there for a year or less.
As a self-employed individual or an independent contractor where your home is your place of work, the rules slightly differ. If your home office qualifies as your main place of business, you can deduct the transportation costs between your home and another work location for the same business.
Is mileage reimbursement taxed?
Mileage reimbursement that complies with IRS rules is not considered a benefit, and it is not taxed. However, if you are reimbursed at a higher rate than the standard IRS rates or by another type of reimbursement such as lump sums, the sum exceeding the rate per mile reimbursement will be considered a benefit and will be taxed as a part of your income. Read more about mileage reimbursement as a taxable income.
IRS mileage reimbursement rules
If you drive your personal vehicle for business purposes, you will be eligible for receiving mileage reimbursement from your employer.
While there are no federal laws requiring employers to reimburse employee mileage, state laws sometimes require employees to provide mileage reimbursements. This is the case in California, Massachusetts and Illinois.
Your employer may reimburse you at the standard IRS mileage rate, at FAVR (fixed and variable rate), or provide you with a fixed monthly mileage allowance.
- The standard mileage rate is meant to cover all fixed and variable costs of using your vehicle for business driving and is typically paid out once you have provided a log of your business mileage.
- FAVR consists of two separate payments, one to cover fixed, and another to cover variable costs.
- A mileage allowance is typically paid upfront on a monthly basis, so you have cash on hand for your month’s business mileage expenses.
Keep in mind that all types of reimbursement payments, no matter the chosen method, have to work out to be no higher per mile than the IRS mileage rate per mile. Any reimbursement program that does not meet the IRS conditions will be considered a benefit and be taxed as such.
Learn more about the differences between the IRS standard mileage rate reimbursement, the FAVR method and mileage allowance and when your reimbursement may be taxed.
In order to be reimbursed for your business driving, you will need to provide your employer with consistent records of your mileage. Those should include information for every business trip, including the date, destination, purpose and total mileage driven. Some employers might require more than this - we recommend you check with your employer before you start keeping a mileage log.
Note that according to the Tax Cuts and Jobs Act, you won’t be able to claim mileage as a tax deduction even if your employer doesn’t reimburse you.
For self-employed individuals
As a self-employed taxpayer, you can deduct mileage accrued for business purposes. If you use your vehicle solely for business, you can deduct all the expenses related to owning and operating it. If you use your vehicle for both personal and business travel, you can only deduct the costs related to its business use.
There are two methods of calculating your mileage claim for tax deduction purposes - the standard mileage rate method and the actual expenses method.
The simpler method for claiming mileage is the standard mileage rate method. With it, you use the official business rate per mile set by the IRS to claim business miles. The only documentation you need to keep throughout the year is a mileage log.
The actual expenses method allows you to claim the actual expenses you’ve had for owning and running your vehicle for the business portion of its use throughout the year. Keep in mind this method is more involved and requires collecting all receipts of your vehicle expenses.
You can claim a mileage deduction every year on your tax return so long as you have proof of your business miles and can substantiate your claim. See our dedicated article on self-employed mileage deductions to learn more about the methods and how to select the right one for you.
As an employer, you are not required to provide mileage reimbursement to your employees, but more often than not it will be expected of you to do so, and it often makes you a more competitive employer. While there are several methods by which you can reimburse employees for their work-related mileage, the simplest is to use the standard IRS mileage reimbursement rate per mile. Each month, employees submit mileage logs as proof of their business mileage, and for each mile, they are reimbursed 67 cents (this is the official rate for 2024). You should not include this reimbursement in employees' income, as it is not considered a benefit. You can then expense the payments of mileage reimbursement from your company profits.
It is worth noting that while the IRS publishes an official mileage rate each year, you are not obliged to use it for reimbursing your employees. You can choose to reimburse them at a higher or lower rate than the official one.
Besides the rate-per-mile method, there are a few other methods you can consider for the reimbursement of employees' miles, such as providing car allowances or fixed and variable rates. You can read more on what each method entails and its pros and cons in our dedicated mileage reimbursement for employers guide.
Records for your IRS mileage reimbursement
IRS mileage reimbursement rules require that you keep adequate records of your mileage. Keeping adequate records means that you record your mileage at or near the time of each trip you take. In practice, this means keeping a mileage log with your trips that needs to contain:
- The total mileage of each trip
- The time
- Your destination
- The purpose of each trip
- The total mileage for the year
Keep in mind if you use your vehicle for both business and personal driving, you should keep track of both, in order to figure out the percentage of business use you can claim mileage reimbursement for.
Learn more about keeping compliant mileage records.
Calculating your mileage reimbursement
According to IRS mileage reimbursement rules, you can only claim mileage for the business use of your vehicle. Let's go through a quick example of figuring out business use:
You've driven a total of 300 miles so far in 2024. You have ten personal trips that total 200 miles and three business trips that amount to 100 business miles. Calculating your total mileage reimbursement based on the IRS mileage reimbursement rate is simple: multiply the business mileage you’ve driven by the current IRS mileage rate.
100 business miles x 67 cents = $67 in mileage reimbursement.
Use the calculator below to quickly calculate your mileage reimbursement.
If you need to figure out the business use portion of your vehicle for the actual expenses method, divide your business miles by the total mileage. In our example, your business mileage is 33% of the total miles you’ve driven.
The equation is simple: 100 business miles / 300 total miles = 0.33 = 33%.
Then you will be able to deduct 33% of all vehicle expenses.
We hope you found our overview of the rules of IRS mileage reimbursement helpful. If you still have questions, you can find more in-depth information on each topic in the articles linked to in the guide.
How to automate your mileage logbook
IRS Mileage Guide
- How To Claim Your Mileage On Taxes In 5 steps
- Calculate Your Reimbursement
- For Self-Employed
- California Mileage Reimbursement
- IRS Medical And Charitable Mileage
- For Employers
- For Employees
- Mileage Log Requirements
- How The IRS Mileage Rate Is Set
- Current Mileage Rates
- Is Reimbursement Taxed?
- IRS Mileage Rate 2022
- IRS Mileage Rate 2021
- Mileage Rates 2020