Federal Mileage Rate

What Is the Federal Mileage Rate?

The federal mileage rate is the amount of money an employee can deduct from their federal income taxes for the costs of operating a personal vehicle for qualified business, charity, medical, or moving purposes. The Internal Revenue Service (IRS) determines the standard mileage rates every year, adjusting for inflation and other factors involved in vehicle ownership, such as:

A taxpayer can decide to use either the federal mileage rate when making deductions for qualified expenses, or they can calculate actual expenses themselves.

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What Is the Current Federal Mileage Rate?

The current federal mileage rate varies based on the purpose behind the reimbursement or tax deduction. Standard mileage rates fall under three specific categories: business expenses, medical and moving expenses, and expenses incurred in service to a charity. Each year, the IRS sets the mileage rate for business use based on the previous year’s average fixed and variable vehicle costs in the United States.

Federal Mileage Rates (2023 Tax Year)

The IRS mileage rates for 2023 include:

Federal Mileage Rates (2024 Tax Year)

The IRS mileage rates for 2024 include:

Mileage rates apply to hybrid, electric, diesel, and gasoline-powered vehicles, such as cars, vans, pickup trucks, and panel trucks. It's typically adjusted based on fluctuating gas prices and insurance premium costs, as well as changes in car fuel economy values.

Mileage reimbursement for 2023-24 falls within the restrictions of the Tax Cuts and Jobs Act of 2017 (TCJA). According to this legislation, you cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses through 2025. Also, only active duty military can claim move-related mileage. This does not apply to those on military leave and can only be claimed in cases where a servicemember makes a permanent change of station.

Certain government officials, performing artists, and teachers can claim some exemptions. In some cases, self-employed individuals may be able to deduct mileage as a business expense.

How Is Federal Mileage Reimbursement Calculated?

To calculate the mileage reimbursement amount for an employee, multiply the number of qualified miles by the applicable rate.

Example Using the Federal Mileage Rate (2023)

On three different occasions, Gunther used their personal vehicle to pick up supplies for their coffee shop. The distance traveled each time was 13 miles. Here's how to calculate mileage reimbursement for this employee:

See BambooHR’s federal mileage reimbursement page for additional information on this deduction, including who qualifies for it and how to calculate it.

Are Companies Required to Pay for Mileage?

The practice of reimbursing employees for the miles they drive in their personal vehicle on behalf of work is not required by federal law. However, a few states have their own regulations:

California

Under Labor Code Section 2802, most employers must reimburse employees for expenses or losses incurred as a direct consequence of performing their job duties. Section 2804 prohibits employees from waiving their rights to this reimbursement.

Massachusetts

Most employers who ask an employee to travel from one place to another between the start and end of the workday are required to reimburse the employee for that travel per MA state law. Though this covers many workers, it excludes those not employed in an "occupation" as defined by the state (e.g., seasonal camp counselors, farm workers, and others).

Illinois

The state law in IL requires employers to reimburse employees for expenses and losses within the scope of employment or those directly related to the performance of their job. All employees must be given 30 days to furnish proof of expenses and must follow their employer’s expense reimbursement policy to be covered by the law.

Accountable Plan Rules

Companies paying mileage under an accountable plan must comply with three legal requirements regulated by the IRS:

  1. Business connection: Mileage reimbursements must be made only for deductible service expenses, such as business-related travel.
  2. Claim substantiation: Claims must be supported by employer records that include details such as the time, place, and purpose of travel.
  3. Return of excess: Employees must return any excess reimbursement money they receive back to their employer.

With an accountable plan, the employer doesn’t have to report the reimbursement as taxable wages on an employee’s W-2 form. Also, if the employee's reimbursement equals the expenses incurred, they don't need to claim a deduction. If you have questions about how the federal mileage reimbursement is reflected in your W-2 or pay stub, be sure to ask your employer for more information.

For non-accountable plans (or reimbursement policies that don't meet all accountable plan requirements), employers should establish a detailed mileage reimbursement policy. It may require or allow employees to submit actual travel-related expenses instead of using the flat federal reimbursement rate. This can be especially helpful if the actual expenses incurred exceed the federal rate.

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Can I Reimburse Less than the Standard Mileage Rate?

Yes, employers may choose to reimburse employees at a rate lower than the federal mileage standard. However, the rate must be high enough to cover expenses so that personal vehicle use doesn’t drop an employee’s income below minimum wage.

What Does the Federal Mileage Rate Cover?

Federal mileage rates cover both variable and fixed costs of operating an automobile.

Variable costs include:

Fixed costs include:

Federal mileage rates don't include:

Business-related parking and toll fees may be separately deductible, along with other travel expenses. If the employee uses a company vehicle, they may be able to deduct the actual expenses of operating the car for business purposes. See IRS Publication 463, Travel, Gift, and Car Expenses for more information.

Does the IRS Require Odometer Readings for Federal Mileage?

Employers can ask employees to provide odometer readings for each trip. However, the IRS doesn't require separate odometer records for each business trip to qualify for federal mileage reimbursement.

The IRS only requires odometer readings in certain cases, including:

Additionally, the IRS requires employees to record mileage use, along with the date, destination, and purpose of the trip if reimbursements are being deducted on their federal income taxes. IRS Publication 463, provides an example business mileage and expense log taxpayers can use to track this information, as well as other details.

Examples of Business Mileage

The IRS maintains strict guidelines on what counts as business mileage. You can generally count it as a business expense if you're using the car for purposes related to your job, including:

However, you cannot claim the expenses incurred while commuting to and from work or running personal errands, such as grocery shopping for your household.

Are Business Mileage Reimbursements Taxable?

If the reimbursement occurs under an accountable plan and at the standard mileage rate, it's not considered a benefit and isn't taxable.

Excess reimbursement (above the standard mileage rate) that's not returned in a reasonable amount of time or not calculated based on acceptable recordkeeping is considered non-accountable and treated as taxable income.

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