Mileage Reimbursement Policy: What to Include

A clear mileage reimbursement policy reduces disputes, keeps reimbursements tax-free, and ensures employees know exactly what to do when they drive for work. Here's what to include.

1. Who is eligible

State which employees or contractors are covered: all employees who use a personal vehicle for work, field staff only, or managers at a certain grade level. Also define what trips qualify — client visits, inter-office travel, job-site inspections — and explicitly exclude home-to-office commuting.

2. The reimbursement rate

Most companies reimburse at the IRS standard mileage rate (72.5 cents per mile for 2026) to keep reimbursements tax-free. If you pay above the rate, the excess is taxable. Some employers use a tiered rate that falls as annual miles increase.

3. Mileage log requirements

• Date of each trip.
• Starting address and ending address (or odometer readings).
• Business purpose of the trip.
• Total miles per trip.

4. Submission deadline

Require employees to submit mileage for the prior month within a set window — 15 days after month-end is common. Late submissions may be denied or delayed until the next payroll cycle.

5. Approval workflow

Specify who reviews and approves mileage reports — usually the direct manager. Large claims may require a second-level approval.

6. What happens if you pay above the IRS rate

Any amount above the IRS standard rate is treated as taxable wages unless you require a detailed log comparing actual vehicle costs to the IRS rate. Most companies find it simpler to match the IRS rate exactly and avoid the paperwork.