Mileage Reimbursement Guide

Mileage reimbursement is more than just compensating employees for driving their own car, it’s a key element of financial governance, employee satisfaction, and tax compliance. critical role in ensuring mileage reimbursement policies are fair, cost-effective and audit-proof. 

Why Mileage Reimbursement Matters 

Reimbursing employees for mileage ensures they’re not paying out-of-pocket for business-related vehicle use. For your organization, it’s about: 

• Staying compliant with IRS guidelines and labor laws. 

• Ensuring accurate cost allocation for budgeting and forecasting. 

• Avoiding taxable events from overpayment or poor documentation. 

• Improving employee satisfaction and reducing friction in finance operations. 

A sound policy also helps your team reduce fraud, streamline expense report approvals, and maintain  audit readiness. 

IRS Standard Mileage Rates (2025) 

Each year, the IRS sets a standard mileage rate. For 2025, the business mileage reimbursement rate is: 

$0.70 per mile driven for qualified business purposes. 

This includes gas, wear and tear, insurance and depreciation. Using the IRS rate ensures reimbursements are tax-free when paired with an accountable plan. 

Other IRS rates include: 

• Medical/Moving: $0.21/mile 

• Charitable: $0.14/mile 

Tip: Reimbursements above the IRS rate are considered taxable income unless you can prove actual costs exceed the standard rate. 

What’s an Accountable Plan? 

To keep mileage reimbursements tax-free, you need an accountable plan. The IRS defines this with three conditions: 

• Business connection: travel must be for work. 
  
  
• Substantiation: employees must submit records (e.g. date, miles, purpose). 
  
  
• Return of excess: overpaid reimbursements must be returned within a reasonable timeframe. 

Failure to meet these standards could result in taxable compensation and unnecessary liabilities for your company. 

Policy Design: Flat Rate vs FAVR vs Custom 

When designing your mileage reimbursement policy, consider: 

Important: FAVR plans require more administrative effort but can be more accurate for high-mileage teams. 

What’s Considered Reimbursable Mileage? 

Common eligible mileage includes: 

• Travel between work sites or to client meetings 

• Business errands and deliveries 

• Temporary work locations 

Not reimbursable: 

• Commuting from home to a regular office location 

• Personal errands, even during business trips 

How to Track Mileage Accurately 

Accurate mileage logs are essential. At minimum, your mileage log should include: 

• Date of travel 

• Origin and destination 

• Total miles driven 

• Purpose of the trip 

Manual logs (like spreadsheets) work but are prone to errors. Instead, consider automation with: 

• Mileage tracking apps  

• Corporate card integrations 

• Policy enforcement tools like ExpensePoint 

These help reduce manual effort, prevent fraud, and ensure clean documentation. 

Best Practices  

• Standardize your policy across teams and geographies. 

• Train employees on what qualifies and how to track mileage. 

• Audit monthly reports for anomalies or excessive claims. 

• Use expense management software to automate approval workflows and mileage capture. 

A smart mileage reimbursement policy saves time, ensures tax compliance, and keeps employees happy. As a finance team manager, you can make the process seamless by combining clear policies with the right automation tools. 

Looking for a better way to manage mileage and travel expenses? 
Discover how ExpensePoint helps finance teams streamline reimbursements, enforce policy compliance, and cut processing time.