For 2026, the standard benchmark for how much to reimburse for mileage is 72.5 cents per business mile, the IRS standard mileage rate that took effect January 1, up from 70 cents in 2025.1IRS. 2026 Standard Mileage Rates Notice 2026-10 Pay at or below that figure under an accountable plan and the money is tax-free to the employee and deductible to the employer. Pay above it, skip the paperwork, or use a flat allowance, and part or all of the reimbursement becomes taxable wages.
The 2026 IRS Mileage Rates
The IRS sets three separate rates each year, and the right one depends on why the driving happened:1IRS. 2026 Standard Mileage Rates Notice 2026-10
- Business driving: 72.5 cents per mile
- Medical travel, and moving for active-duty Armed Forces members under a permanent change-of-station order: 20.5 cents per mile
- Driving in service of a charitable organization: 14 cents per mile
The business and medical figures move each year with fuel, insurance, repair, and depreciation costs. The charitable rate is fixed by statute at 14 cents and does not adjust for inflation.2Internal Revenue Service. Standard Mileage Rates The 72.5-cent business rate is meant to cover the whole cost of running a vehicle, rolled into one number: gas, oil, insurance, registration, repairs, tires, and depreciation.
Can You Pay More or Less Than 72.5 Cents?
Yes to both. No federal rule sets the rate an employer must pay. What the IRS rate does is mark the tax line.
Reimbursements at or below 72.5 cents per business mile in 2026, paid under an accountable plan with proper documentation, are excluded from the employee’s wages. They don’t appear on the W-2, and no income, Social Security, or Medicare tax applies.3Internal Revenue Service. Publication 463, Travel, Gift, and Car Expenses
Pay more than 72.5 cents and the excess portion is treated as taxable wages. The rate itself is still your choice; the tax consequence is not. Flat monthly car allowances that don’t tie to documented miles generally count as wages in full, because they fail the substantiation piece of the accountable-plan test.4eCFR. 26 CFR 1.62-2 – Reimbursements and Other Expense Allowance Arrangements
Paying below the IRS rate is legal and common. It just means the employee absorbs the gap, and, as covered further down, most employees can no longer deduct that gap on their own return.
Which Miles Actually Count
The per-mile rate only helps if the miles qualify. The IRS is strict here, and getting it wrong is the most common way reimbursement plans go sideways.
Commuting Doesn’t Count
Driving between home and a regular workplace is a personal expense, not business travel. Distance doesn’t matter, and taking work calls on the drive doesn’t change the answer.3Internal Revenue Service. Publication 463, Travel, Gift, and Car Expenses
Business Miles That Do
Once the workday starts at the first business location, trips from there to other work destinations qualify. That covers driving from the office to a client meeting, moving between two job sites, running to pick up supplies, or delivering documents. The trip has to serve a work purpose, not a personal errand tacked onto the route.3Internal Revenue Service. Publication 463, Travel, Gift, and Car Expenses
The Home-Office Wrinkle
When home is the main place of business, driving from home to a secondary work location can qualify as business travel rather than commuting. The IRS weighs time spent at each location, level of business activity, and income generated at each to decide which is primary.5Internal Revenue Service. Topic No. 511, Business Travel Expenses
The Accountable Plan Rules
Whether a reimbursement is tax-free comes down to one question: does the arrangement qualify as an accountable plan? Three conditions have to be met.3Internal Revenue Service. Publication 463, Travel, Gift, and Car Expenses
- Business connection. The expense has to relate to work the employee performed.
- Adequate accounting. The employee has to document the expense to the employer within a reasonable time. The IRS treats 60 days after the expense as a safe harbor.
- Return of excess. Any advance or reimbursement above the documented expenses has to be returned, with 120 days as the safe harbor.
Employers can set tighter deadlines, and many do. A 30-day submission rule is common. Alternatively, an employer that sends periodic statements (at least quarterly) asking employees to account for outstanding advances gives the employee 120 days from each statement to respond.4eCFR. 26 CFR 1.62-2 – Reimbursements and Other Expense Allowance Arrangements
Miss any of the three conditions and the whole arrangement becomes a nonaccountable plan. Every dollar paid is wages, reported on the W-2, subject to income tax withholding, Social Security, and Medicare, and the employer picks up its share of payroll tax on top.4eCFR. 26 CFR 1.62-2 – Reimbursements and Other Expense Allowance Arrangements
What the Mileage Log Needs
Federal regulations require contemporaneous records, meaning entries made at or near the time of each trip rather than reconstructed later from memory.6eCFR. 26 CFR 1.274-5 – Substantiation Requirements Each entry should capture:
- Date of the trip
- Destination (client name, office address, or similar)
- Business purpose (client meeting, supply pickup, site inspection)
- Miles driven — either odometer readings or total trip distance
A paper notebook, a spreadsheet, or a GPS-based tracking app all work. What matters is that the log is complete and consistent, because that’s what protects the reimbursement if the IRS or the employer questions it.7Internal Revenue Service. Topic No. 510, Business Use of Car
Parking and Tolls Are Extra
The per-mile rate covers the cost of operating the car. It does not cover business-related parking fees or tolls, which can be reimbursed separately on top of the mileage payment. Parking at a regular workplace is treated as a commuting cost and does not qualify.3Internal Revenue Service. Publication 463, Travel, Gift, and Car Expenses
When Reimbursement Is Legally Required
Federal law does not broadly require mileage reimbursement. It sets a floor. Under the Fair Labor Standards Act, an employer cannot let work-related vehicle costs push an employee’s effective pay below the federal minimum wage. If required business driving eats into the paycheck enough to cross that line in a given pay period, the employer has to make up the difference.8U.S. Department of Labor. Field Assistance Bulletin No. 2009-2
A handful of states go further. California, Illinois, and Massachusetts each have laws requiring employers to reimburse necessary business expenses, mileage included. In those states, the obligation runs broader than the federal minimum-wage floor. State labor departments have the specifics.
What Happens If Your Employer Doesn’t Reimburse
The answer depends on how you earn the income.
Self-employed workers, including sole proprietors, freelancers, and independent contractors, can deduct business mileage on Schedule C using the 2026 standard rate of 72.5 cents per mile.7Internal Revenue Service. Topic No. 510, Business Use of Car The deduction comes straight off self-employment income.
W-2 employees mostly cannot. The deduction for unreimbursed employee business expenses, once available as a miscellaneous itemized deduction, has been suspended by federal legislation. The narrow exceptions still able to file Form 2106 are Armed Forces reservists, qualified performing artists, and fee-basis state or local government officials.7Internal Revenue Service. Topic No. 510, Business Use of Car For everyone else on a W-2, an employer’s decision not to reimburse, or to run a nonaccountable plan, means the after-tax cost of business driving lands entirely on the employee with no way to recover it at tax time. That’s the real reason getting the rate and the plan structure right matters on both sides of the paycheck.