Mileage rate

The mileage rate is the standard set by the IRS that businesses can use to reimburse employees for using their personal vehicles for work-related travel. Employers can also use the mileage rate to deduct vehicle expenses on their business tax returns.

Homebase Team

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What is the mileage rate?

The mileage rate is the standard set by the IRS that businesses can use to reimburse employees for using their personal vehicles for work-related travel. Employers can also use the mileage rate to deduct vehicle expenses on their business tax returns.

For businesses using Homebase payroll, accurately tracking mileage reimbursements ensures compliance with IRS regulations while helping reduce tax liability.

How the mileage rate works

The IRS updates the standard mileage rate annually to reflect changes in fuel costs, vehicle maintenance, and depreciation. Employers can use this rate to calculate reimbursements for:

Driving to meet clients or customers
Traveling between work locations
Running business-related errands

To qualify, mileage must be directly related to work activities and properly documented.

What is the current IRS mileage rate

The IRS standard mileage rates for 2025 are:

Self-employed and business: 70 cents/mile
Charities: 14 cents/mile
Medical: 21 cents/mile
Moving (military only): 21 cents/mile

Employers should check the IRS website annually for updates.

Calculating mileage reimbursement

To determine mileage reimbursement, multiply the total miles driven for business purposes by the current IRS mileage rate.

For example, if an employee drives 150 miles for work in a month:

150 miles × $0.655 = $98.25

Employers can reimburse at a different rate, but amounts exceeding the IRS standard may be considered taxable income.

How mileage reimbursement affects payroll and taxes

Mileage reimbursements are not taxable if they:

Follow the IRS standard mileage rate
Are documented with proper records, including dates, purpose, and miles traveled
Are reimbursed through an accountable plan, where any excess payments are returned

If employers reimburse above the IRS rate or provide a lump sum without tracking actual mileage, the excess may be subject to payroll taxes.

Best ways to track mileage for reimbursements

Employers should require employees to keep accurate records, including:

Date and purpose of the trip
Starting and ending locations
Total miles driven

Using Homebase payroll ensures that mileage reimbursements are properly recorded and processed, helping businesses comply with IRS guidelines.

How Homebase makes mileage reimbursement easier

Managing mileage reimbursements manually can be time-consuming, but Homebase payroll makes it easier by:

Accurately tracking and documenting mileage reimbursements
Ensuring compliance with IRS guidelines to avoid tax issues
Automating payroll adjustments for mileage payments
Providing detailed payroll reports to simplify tax filings

Sign up for Homebase today to automate payroll and mileage reimbursement tracking.

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