Mileage Reimbursement: Definition, Examples and Tracking Tips

Updated January 10, 2023

An illustration showing two hands holding a piece of paper on the left with the words "Mileage Log for Employee Reimbursement" at the top of a table. One hand writes on it with a pen. A purple car with two trees behind it is pictured in the right of the image.

Travel is a requirement for many careers. Some companies may reimburse you for travel costs or you may choose to list mileage for certain travel as a tax deduction. If you plan to travel for business, it helps to understand employer expectations and requirements for mileage reimbursement. In this article, we discuss important aspects of mileage reimbursement, how to determine your eligibility and tips for accurately tracking mileage expenses.Key takeaways:

Mileage reimbursement is employer-set compensation for work-related use of your personal vehicle.
Some companies pay monthly car allowances while others might require you to track mileage for specific travel.
The Internal Revenue Service (IRS) has standard mileage rates if you list mileage deduction on your income tax.

What is mileage reimbursement?

Mileage reimbursement is what an employer pays an employee for business-related use of their personal vehicle. Companies typically use a cents-per-mile formula. However, reimbursement rates, covered expenses and payment terms all depend on the employer and their agreement with the employee. Related: 11 Popular Travel Jobs

Example of mileage reimbursement

Company ABC pays its sales staff 58 cents per mile driven to and from customer locations. As an employee, you are sent to meet with XWY Builders, a round-trip journey of 50 miles. Using the company’s cent-per-mile formula, you would receive 0.58 cents X 50. Your total reimbursement would be $29. The company’s reimbursement policy applies when you use your personal car for:

Driving to meet clients and customers
Driving to the bank for business transactions
Driving to a store to purchase office supplies or equipment
Driving to the airport for business travel
Any other business-related trip or errand

It does not apply when you use your car for:

Commuting to or from work and your home or going out for lunch from the office
Any extra activities that are not directly related to the business, such as grabbing a coffee while en route to a destination
Taking a detour to meet a friend or relative while en route a business trip

Aspects of mileage reimbursement

Mileage reimbursement can depend on several factors, including:

Eligibility

Employees who use their personal vehicles for work purposes may be eligible for mileage reimbursement from their employer, however, this does not mean all employees are eligible. Whether you qualify depends on the details of your employment. For example, a salesperson may claim mileage travel to visit customers. Independent contractors who work for ride shares and delivery companies are not usually reimbursed for mileage. It is up to the employer to decide what type of travel will be reimbursed. It is important to know what your company will and will not cover regarding reimbursement. Generally, the following travel is included in a traditional mileage reimbursement policy:

Visits with customers
Transporting customers to a destination
Travel to a temporary job site
Travel to and from the airport, train station or bus station for business trips
Travel to a conference or business convention

Keep in mind that company-paid reimbursement may affect your taxes. It is recommended to consult with an experienced tax preparer to determine how your income might be affected.

Standard rates

While a company can set its own reimbursement rates, it may choose to follow the standard mileage rate set by the Internal Revenue Service (IRS). This is the amount that the IRS allows for mileage deductions on tax returns. The IRS has set the 2022 rate as 58.5 cents per mile driven for business use, up 2.5 cents from the rate for 2021.While many businesses use the IRS rate as a base, it is not a legal requirement. Your employer can offer reimbursement that is less or more than the federal standard.

Employer requirements

Employers are not required to reimburse per mile unless failing to do so causes the employee to drop below the state’s minimum wage level. Although companies are not required to offer mileage reimbursement, it can be used to negotiate a compensation package. The ability to adjust reimbursement rates can be a great way to attract high-quality employees. Exceeding the federal standard rate can be translated as additional income. This can help attract high-quality candidates to fill an open role. Because employers cannot always increase pay, they can improve the compensation package with additional benefits like:

Mileage allowance
Fuel card
Monthly vehicle maintenance
Mileage reimbursement

How to track mileage reimbursement

Some employers require employees to turn in gas and car maintenance receipts to receive reimbursement. Using the standard deduction rate eliminates the inconvenient process of collecting receipts. Your employer may request that you download a tracking app or maintain a log of miles driven.You can easily keep track of your mileage with an expense-tracking program. Within these programs, you can set your reimbursement rate and then calculate how much you are owed based on the mileage entered. Most employers include reimbursement on the next paycheck. You can track your mileage reimbursement by following these steps:

Record the date of the trip.
Record the time of the trip.
Write down the odometer reading when starting the trip.
Include the location and destination of the trip.
Include a few words that describe the purpose of the trip.
Write down the odometer reading after the trip.

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Tips for asking your employer for mileage reimbursement

You might ask your employer for mileage reimbursement when negotiating your compensation package for a new job. You might also request mileage reimbursement if your position has changed and requires you to travel more frequently with your personal vehicle. Consider these tips as you prepare for a discussion about mileage reimbursement:

Calculate your current/intended mileage ahead of time. Employers don’t always realize how many miles their employees will put on their vehicles. Doing your research can help you begin the conversation and have specific talking points.
Calculate how much this translates into cost. After you have a set number of miles that you intend to drive, compare this to the average cost of fuel.
Complete your calculation. Factor in the cost of maintenance and repairs and add it to the total. Provide these numbers to your employer to support your request.
Discuss available reimbursement rates. Ultimately, it is up to your employer to set the mileage reimbursement. However, you can enter the conversation prepared by looking up standard federal rates beforehand.
Discuss a record-keeping process. It will help you and your employer track mileage if you plan a record-keeping process before traveling.
Make it a deduction. Remember that if you aren’t reimbursed for business mileage, you may deduct the cost of work-related driving on your taxes. Consult a tax preparer for more details.