Company Mileage Policy Template (Free)

If you run a small business and want to reimburse employees for business mileage tax-free, you need a written policy. Here is a template that meets the IRS three-part accountable-plan test.

Why you need a written policy

A formal mileage reimbursement policy protects both employer and employee. The employer gets a clean tax deduction; the employee receives reimbursement tax-free. Without a written policy, the IRS may treat reimbursements as taxable wages.

Mileage Reimbursement Policy (template)

Adapt for your business. Have it reviewed by a tax professional before adoption.

Purpose. [Company Name] reimburses employees for business use of their personal vehicle when such use is required as part of their duties. This policy is structured as an accountable plan under Treasury Regulation 1.62-2 so reimbursements are not taxable to the employee.

Reimbursement rate. The IRS standard mileage rate in effect for the calendar year (currently 72.5 cents per mile for 2026, subject to annual adjustment).

Eligible miles. Business miles driven during the course of company business. Excludes commuting between home and the regular workplace. Includes drives between client sites, drives to temporary work locations, drives to training sessions, and drives to off-site meetings.

Substantiation. Employees must submit a monthly mileage log including: date, destination address, business purpose, and miles driven for each trip. Logs are due by the 5th business day of the following month.

Reimbursement timing. Approved mileage reimbursements are paid within 14 days of submission, separately from regular wages.

Recordkeeping. Mileage logs and supporting documentation are retained by the company for a minimum of 4 years.

State law. Where state law requires mileage reimbursement (California Labor Code §2802, Illinois 820 ILCS 115/9.5, etc.), this policy supersedes any conflicting practice.

Implementation tips

• Require contemporaneous mileage logs from the start. Reconstructed monthly logs do not satisfy IRS standards.
• Define "regular workplace" for each role to avoid commuting/business mile confusion.
• Have employees track miles in a tracker app rather than retroactively in a spreadsheet.
• Review the IRS standard rate each January and update the policy reference.
• For larger fleets, consider FAVR for fairness across regions.

Disclaimer: this template is informational. Have any policy reviewed by a tax professional or employment attorney before adoption.

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