Texas Mileage Reimbursement Law: IRS Rate and Employer Rules

Texas mileage reimbursement law starts with a blunt fact: no Texas statute requires private employers to reimburse employees for using a personal vehicle at work. Reimbursement becomes mandatory only when federal minimum-wage rules kick in or when an employer has promised it in a contract, handbook, or established practice. When employers do pay, most use the IRS standard mileage rate, which is 72.5 cents per mile for 2026.¹

When Texas Employers Must Reimburse Mileage

Two separate rules can turn a discretionary practice into a legal obligation.

The Federal Minimum Wage Floor

The Fair Labor Standards Act does not directly require mileage reimbursement. It does require that nonexempt employees receive at least $7.25 per hour free and clear of employer-imposed costs. When a job requires a personal vehicle, that vehicle becomes a tool of the trade, and unreimbursed fuel, maintenance, and depreciation attributable to business miles count against the employee’s pay for minimum-wage purposes.² If those costs push the effective hourly rate below $7.25 in any workweek, the employer has violated federal law.

This risk lands hardest on lower-wage workers who drive a lot. A $10-an-hour employee running deliveries all day can slip under the floor quickly; a salaried manager driving to an occasional off-site meeting will not. Employers close to minimum wage should run the numbers for each affected employee every pay period.

Contracts, Handbooks, and Past Practice

An employer’s own written commitment to reimburse mileage is enforceable. The Texas Payday Law requires employers to pay wages according to the terms of a written agreement, and Texas courts have held employers to their reimbursement policies.³ If your offer letter, contract, or handbook says the company reimburses mileage at the IRS rate, that promise carries the force of a wage claim if the company stops paying.

Consistent past practice can create the same expectation. An employer that has reimbursed mileage informally for years, then abruptly cuts it off, may find that its own conduct has turned a favor into an obligation. Verbal commitments and settled patterns are harder to prove than written policy, but they are not toothless.

Which Miles Actually Count

Not every mile driven is reimbursable. The commute between home and a regular workplace is not work time under Department of Labor rules, and employers have no obligation to pay for it.⁴ Once an employee reaches the first work location and then drives to a second job site, a client meeting, or employer-required training, that travel is compensable business mileage.

Field technicians, mobile sales staff, and anyone with a route-based job generate most of the disputes here. A defensible policy says it plainly: the drive from home to your first assigned location each day is your commute; travel between assigned locations during the workday is reimbursable.

The 2026 IRS Standard Mileage Rate

Starting January 1, 2026, the IRS standard mileage rate for business use of a car, van, pickup, or panel truck is 72.5 cents per mile, up 2.5 cents from 2025. The rate applies to gasoline, diesel, hybrid, and fully electric vehicles alike.¹

Private employers are not required to use this rate. It is an optional benchmark the IRS publishes to simplify recordkeeping, and it has become the default because reimbursing at or below it keeps the payment tax-free. Employees using the standard rate on a vehicle they own must choose that method in the first year the vehicle is available for business use. For leased vehicles, the choice locks in for the entire lease, including renewals.¹

How Employers Set the Rate

Most Texas employers reimburse at or near the IRS rate. Employees log miles, multiply by the rate, and get paid. No fuel receipts, no depreciation math.

Some companies reimburse based on documented actual expenses, tracking fuel, maintenance, insurance, and depreciation for each employee’s vehicle. The result may be more accurate for unusual vehicles, but it demands receipts, logs, and case-by-case review. If the per-mile total exceeds the IRS standard rate, the excess is taxable to the employee.

Hybrid policies pay a flat per-mile rate plus separate coverage for items like tolls, parking, or high-fuel regions. For a Texas company covering both urban and rural territory, this can smooth out cost differences. Consistency matters. If some employees get extra fuel coverage and others do not, document the criteria so the policy is defensible.

How Reimbursements Are Taxed

Whether mileage payments show up as taxable wages depends on whether the plan qualifies as an “accountable plan” under IRS rules. An accountable plan meets three requirements:⁵

Business connection. The expense relates to services performed as an employee.
Adequate accounting. The employee substantiates the expense to the employer within a reasonable time, typically through mileage logs or receipts.
Return of excess. Any reimbursement above the substantiated expense goes back to the employer within a reasonable time.

Meet all three and the reimbursement stays off the W-2 and out of income and payroll tax withholding. Miss any of them and the IRS treats the whole payment as a nonaccountable plan. Nonaccountable reimbursements land in Box 1 of the W-2 as wages, fully subject to income tax, Social Security, and Medicare withholding.⁵

Payments above the IRS rate get split. The portion up to 72.5 cents per mile appears under code L in Box 12 and is not taxable. The excess goes into Box 1 as wages.⁵ Employers who want to pay above the standard rate need payroll systems set up for that split.

Mileage and Overtime for Nonexempt Employees

Reasonable travel-expense reimbursements are excluded from the “regular rate” used to calculate overtime under the FLSA, so long as the amounts reasonably approximate actual expenses.⁶ Two things break the exclusion. Reimbursing personal commuting expenses is treated as compensation and folds into the regular rate. A “reimbursement” that is disproportionately large compared to the actual expense pulls the excess into the regular rate as well.⁷ An inflated regular rate raises the overtime premium the employer owes. Sticking to the IRS standard rate is the cleanest way to keep reimbursements out of overtime math.

What to Keep in Your Records

A mileage log that will hold up in an IRS audit or a wage dispute records four things for each trip: the date, the starting and ending locations, total miles, and the business purpose. Odometer readings add another layer, particularly for actual-expense reimbursement. GPS-based mileage apps produce cleaner records than handwritten notes.

The IRS requires records supporting income, deductions, and credits to be kept for at least three years from the date the return is filed.⁸ Treat that as a minimum. If reimbursement runs above the IRS standard rate, keep the documentation showing why. Inconsistent records across employees make an employer’s whole program look unreliable during an audit or claim.

What to Do If You Are Not Being Paid

Start with the employer. The TWC recommends walking through the policy language and mileage records with the employer before filing anything.³ Many disputes are recordkeeping problems rather than refusals.

If that fails, the route depends on the nature of the claim. When unpaid mileage has pushed effective wages below the federal minimum, file a complaint with the U.S. Department of Labor’s Wage and Hour Division. When the dispute is about a broken promise in a contract or handbook, file a wage claim with the TWC under the Texas Payday Law. The claim must be filed within 180 days of the date the wages were supposed to be paid.³

The TWC investigates and issues a Preliminary Wage Determination Order. Either side has 21 calendar days to appeal in writing; otherwise the determination becomes the Commission’s final decision.⁹ Employers that refuse to pay after a final order face collection actions, including bank levies and liens, and the TWC can require a bond securing future wage payments for up to three years.³

Texas small claims court handles cases up to $20,000 and does not require an attorney.¹⁰ For larger or more complex disputes, a breach of contract suit in county or district court is the remaining option.

1
Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents per Mile
2
U.S. Department of Labor. WHD Opinion Letter FLSA2020-12
3
Texas Workforce Commission. Texas Payday Law – Wage Claim
4
U.S. Department of Labor. Fact Sheet #22 – Hours Worked Under the Fair Labor Standards Act (FLSA)
5
Internal Revenue Service. Publication 463 – Travel, Gift, and Car Expenses
6
Office of the Law Revision Counsel. 29 USC 207 – Maximum Hours
7
eCFR. 29 CFR Part 778, Subpart C – Payments That May Be Excluded From the Regular Rate
8
Internal Revenue Service. How Long Should I Keep Records
9
Texas Workforce Commission. Wage Claim and Appeal Process in Texas
10
Texas State Law Library. How Much Can I Sue for in a Small Claims Court