What is mileage reimbursement?
Mileage reimbursement pays employees back for business miles they drive in their own cars. This cheat sheet covers how to think about it, how the math works and where it goes wrong. The detail is further down.
How to think about it
- The IRS rate is the usual yardstick. Many businesses use the IRS standard mileage rate as a baseline. For business miles it is 72.5 cents a mile from Jan. 1 to June 30, 2026, and 76 cents from July 1 to Dec. 31, 2026.
- The rate covers the whole car. The IRS sets the business rate from an annual study of the fixed and variable costs of running a car. A driver using the standard rate can't also deduct gas, insurance or repairs.
- Tolls and parking sit outside it. Business parking fees and tolls can be claimed on top of the standard mileage rate.
- Commuting doesn't count. Driving between home and your main or regular place of work is a personal commuting expense, no matter how far it is.
The math
Business miles driven x the per-mile rate = the reimbursement.
An employee drives 175 business miles in August 2026, reimbursed at the IRS rate of 76 cents a mile. 175 x $0.76.
$133
Illustrative example. Miles driven from Jan. 1 to June 30, 2026 use the 72.5-cent rate, and your company may set its own rate.
Where it goes wrong
- Paying above the IRS rate. Under an accountable plan, the amount up to the standard mileage rate isn't taxable. Anything above it goes in box 1 of the W-2 as wages.
- No record of the trip. Employees need to show the date, place and business purpose of each trip, from a record kept at or near the time of the drive.
- Using an old rate. The IRS raised the 2026 business rate partway through the year, from 72.5 cents to 76 cents for miles driven on or after July 1.
IRS standard mileage rates for 2026
| Use | Jan. 1 to June 30 | July 1 to Dec. 31 |
|---|---|---|
| Business | 72.5 cents a mile | 76 cents a mile |
| Medical, or moving for military only | 20.5 cents a mile | 23.5 cents a mile |
| Charity | 14 cents a mile | 14 cents a mile |
How it works on Engine
Engine's free business travel expense report template has a separate mileage log for the date, origin, destination, business purpose and miles of each drive. The Excel version multiplies the miles by the IRS rate and totals each expense category.
Questions
What is the IRS mileage rate for 2026?
For business use, 72.5 cents a mile for Jan. 1 to June 30, 2026 and 76 cents a mile for July 1 to Dec. 31, 2026. The rate for charity driving stays at 14 cents.
Is mileage reimbursement taxable?
Not if it is paid under an accountable plan at or below the IRS rate. Under an accountable plan, any amount above the rate is reported as wages. Under a nonaccountable plan, the whole amount is added to wages in box 1 of the W-2.
Does mileage reimbursement include gas?
Yes, if you use the IRS standard rate. The rate is built from the fixed and variable costs of operating a car, and a driver using it can't deduct gas separately.
Can employees deduct mileage their employer doesn't reimburse?
Most can't. IRS Publication 463 says employees can no longer claim unreimbursed car costs as a miscellaneous itemized deduction for tax years beginning after 2017. Armed Forces reservists and a few other groups are exceptions.
Sources
- Internal Revenue Service, Standard mileage rates, accessed November 2, 2026.
- Internal Revenue Service, IRS sets 2026 business standard mileage rate at 72.5 cents per mile, up 2.5 cents, accessed November 2, 2026.
- Internal Revenue Service, Publication 463 (2025), Travel, Gift, and Car Expenses, accessed November 2, 2026.
- Engine, How does mileage reimbursement work? A guide for employers, accessed November 2, 2026.
- Engine, Business Travel Expense Report Template (Free), accessed November 2, 2026.
- Engine, Rental Car Booking for Business Travel, accessed November 2, 2026.