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Mileage reimbursement

This page is general information, not tax advice.

Since 2018, most employees cannot deduct unreimbursed car expenses. The deduction was a miscellaneous itemized deduction, and those are suspended. The practical route for an employee is reimbursement from the employer, and the tax treatment of the reimbursement depends on whether the employer's plan is an accountable plan. The rules are in chapter 6 of Publication 463.

The three rules of an accountable plan

A reimbursement or allowance arrangement is an accountable plan if it meets all three of these.

  1. Business connection. The expenses must be deductible business expenses you paid while performing services as an employee.
  2. Adequate accounting. You must account to your employer for the expenses within a reasonable period of time.
  3. Return of excess. You must return any reimbursement or allowance that is more than the expenses you accounted for, within a reasonable period of time.

Publication 463 gives safe-harbor periods. An advance within 30 days of the expense, an accounting within 60 days after the expense, a return of excess within 120 days after the expense, and a response within 120 days to a periodic statement from the employer are all treated as reasonable.

Adequate accounting for mileage

You account adequately by giving your employer a record with the elements in Table 5-1, made at or near the time of the driving. For car expenses the elements are the date, the destination, the business purpose, and the miles of each business trip, plus the total miles for the year. A mileage allowance at or below the federal rate satisfies the amount element, so you prove the time, place, and purpose and the rate covers the cost.

Mileage reimbursement calculator

The federal rate for car expenses is the standard mileage rate. For 2026 it is 72.5 cents a mile through June 30 and 76 cents from July 1, under Notice 2026-10 and the July 13, 2026 announcement. For 2025 it is 70 cents.

The calculation is business miles times the rate your employer pays. 640 business miles in March 2026 × $0.725 = $464.00 at the federal rate. The same miles in September 2026 × $0.76 = $486.40. At a company rate of 60 cents, either month is $384.00. Commuting miles between home and your regular workplace are never included. A longer worked example is on the mileage calculator.

What the federal rate does

  • If your employer reimburses at or below the federal rate under an accountable plan and you account adequately, the reimbursement is not included in box 1 of your W-2 and you report nothing.
  • If your employer reimburses above the federal rate, the amount up to the federal rate is reported under code L in box 12 of your W-2 and is not taxable. The excess is included in box 1 as wages.
  • If the plan is not an accountable plan, the whole reimbursement is wages in box 1, and you cannot deduct the expense unless you are in one of the groups that can still file Form 2106.

Publication 463 gives the example of a fee-basis official who drives 10,000 miles in 2025 and is reimbursed 75 cents a mile. The employer reports $7,000 under code L and $500 as wages.

The monthly report

An employer's reimbursement form asks for the same elements Table 5-1 does. The workflow that keeps you inside the safe harbor is a monthly report.

  1. Set the rate your employer pays. Many pay the federal rate, some pay less.
  2. Tag your regular workplace, so drives between home and it are left out as commuting.
  3. Record each business drive with its date, start and end places, purpose, and miles, at or near the time you make it.
  4. At the end of the month, total the drives, multiply by the rate, and submit the report with the list of drives behind the total. Monthly is well inside the 60-day accounting window.
  5. If you were advanced more than the report supports, return the excess within 120 days.

Keep a copy of each report. It is your record if the employer's plan is ever questioned.

Fixed and variable rate plans

An employer may reimburse under a fixed and variable rate (FAVR) allowance instead, which combines a cents-per-mile rate for variable costs with a flat amount for fixed costs. The employer sets the records it needs. The mileage log is still the record.

Employees who can still deduct

Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses can still deduct unreimbursed car expenses on Form 2106. Everyone else cannot.

For employers

An employer that pays a mileage allowance up to the federal rate under an accountable plan does not report it as wages and does not withhold on it. The employer needs the same records the IRS would ask the employee for, and it needs the employee to return any excess within a reasonable time. A reimbursement policy that names the 60-day and 120-day periods keeps the plan inside the safe harbor. Mileage reimbursement software for a team is a different product from a personal tracker, and Miles does not do the employer side.

How Miles handles this

Miles is the employee's side of the report. It produces a reimbursement report for any date range, listing each business trip with its date, destination, purpose, and miles, totaled at the federal rate for each rate period or at a custom rate the employer sets. The report is a PDF and a CSV, sent through the share sheet. Drives between Home and your Regular workplace are classified as commuting and left out. The weekly classification reminder keeps the log inside the 60-day accounting window. Form 2106 Part II is filled for the four groups who can still file it. Review note. The field mapping for Form 2106 must be verified against the current form before the feature ships. The short version of the workflow is on work mileage.

Miles is coming soon.

For Canada, see CRA automobile allowance rates.