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.

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:

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

The IRS standard mileage rates for 2025 are:

Employers should check the IRS website annually for updates.

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.

Mileage reimbursements are not taxable if they:

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

Employers should require employees to keep accurate records, including:

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

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

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