Mileage Reimbursement

Mileage reimbursement is the payment an employer makes to a worker for using a personal vehicle for work. Typically calculated at the IRS standard rate (72.5¢/mile in 2026), reimbursement up to that rate is tax-free to the employee.

When reimbursement is required

In the US, nine states legally require employer reimbursement: California, Illinois, Massachusetts, New York, Washington, New Hampshire, North Dakota, Montana, and Iowa. See your state's rules. Most other states leave it to employer discretion.

Tax treatment

Reimbursement under a qualified accountable plan (with documented business purpose and mileage logs) is tax-free up to the IRS rate. Excess reimbursement above the rate is taxable income. Reimbursement without proper documentation is also taxable.

Versus deduction

Reimbursement and deduction are different mechanisms. W-2 employees can no longer deduct unreimbursed mileage federally. Reimbursement is the only path. Self-employed workers do not receive reimbursement; they take the deduction directly.

Related terms