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 (76¢/mile from July 1, 2026, up from 72.5¢ earlier in the year), reimbursement up to that rate is tax-free to the employee.

When reimbursement is required

In the US, three states broadly mandate employer reimbursement of business mileage: California (Labor Code 2802), Illinois, and Massachusetts. Several others - including New York, Washington, and Pennsylvania - require it only in limited cases, such as when unreimbursed costs would drop pay below minimum wage. 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.

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