Alabama Mileage Reimbursement Rules

Alabama employers, take heed! You need to understand mileage reimbursement laws in order to avoid compliance lapses and to foster a supportive work environment. Though Alabama doesn’t require private employers to provide mileage reimbursement for everyday business travel, specific rules apply for State employees and around workers’ compensation.

Read on for a breakdown of mileage reimbursement requirements in the Yellowhammer State.

Reimbursement for Alabama State Employees

Alabama Code § 36-7-22 says that drivers on official State business have to be reimbursed at the same mileage rate dictated by the IRS Code. Alabama’s Legislative, Executive and Judicial branches, state departments, boards, and commissions comprise “state employees.” The law also specifies:

• that the mileage rate is $0.70 per mile for 2025. State rules around this usually follow the IRS rate, updated annually;
• that reimbursements have to be issued no later than thirty days from the date a request is submitted;
• for non-legislative employees, “travel” means leaving your permanent place of employment to conduct official state business. (Commuting is almost always excluded from mileage reimbursement.) 

This statute makes sure that all state employees get consistent repayment for using their personal vehicles for work-related tasks.

Workers’ Compensation

For private employers, the most important obligation arises under Ala. Code § 25-5-77(f). This statute requires employers to reimburse injured employees who must travel to and from medical or rehabilitation appointments for a work-related injury. This law has been in effect for travel on or after August 1, 1992, and ensures that an injured employee’s necessary medical travel does not become a financial burden.

• The rate is currently $0.70 per mile (for 2025), the same rate as State employees receive.

So even though there’s no statewide mandate forcing private employers to reimburse ordinary business travel, you must compensate mileage if it relates to a workplace injury under workers’ compensation rules.

Private Employers: When (and Why) to Reimburse Beyond Workers’ Comp

For everyday business mileage—such as paying sales calls, doing field work, or running errands—the Heart of Dixie does not have a law that compels private employers to follow the IRS or state mileage rate. That said, reimbursing for mileage (either at the IRS rate, or through a program like Fixed and Variable Rate), allows employers to:

• Gain a competitive advantage: offering mileage reimbursement helps position your company as supportive and employee-friendly.
• Avoid wage issues: ensure that unreimbursed travel expenses do not effectively push your Alabamian employee’s pay below the federal minimum wage ($7.25/hour), especially for non-exempt workers.

Important Note

If you choose to reimburse above $0.70 (for business mileage in 2025), the excess is taxable to your employee. If you reimburse below $0.70, employees may or may not be able to claim the difference on their personal taxes, depending on federal tax rules in effect.

Choosing a Reimbursement Program for Your Alabama Drivers

To compensate field teams for business driving in the Cotton State, you have choices that go beyond the standard IRS rate. Each of the three following approaches offer different advantages:

Fixed & Variable Rate (FAVR)

A Fixed & Variable Rate (FAVR) program is the most popular choice for organizations with high-mileage drivers. By separating fixed costs (like insurance, registration, and depreciation) from variable costs (fuel, maintenance, and repairs), FAVR lets you offer accurate, fair market reimbursements that can be entirely tax-free for Alabamian employees. This data-driven method ensures that your drivers are compensated in direct proportion to the actual expenses they incur, helping both you and your team avoid unnecessary tax burdens while maintaining compliance with IRS rules.

Tax-Free Car Allowance (TFCA)

A Tax-Free Car Allowance (TFCA) is an IRS-compliant method for providing a flat payment component to your drivers that can be 100% tax-free, provided it’s set up correctly. This program allows employers to offer a predictable reimbursement. TFCA can be paired with software solutions—like Cardata’s platform—to ensure reimbursements remain within the required limits for tax-exempt status.

Why consider a TFCA?

• It offers a consistent monthly or periodic allowance.
• Simple to administer, as it doesn’t have the same compliance requirements as FAVR 
• When structured properly, it can be entirely tax-free for employees, up to the IRS rate.

Cents per Mile (CPM)

A Cents per Mile (CPM) program is a straightforward option ideal for occasional or low-mileage drivers. You simply pay employees for the miles they drive at a pre-established rate—often the IRS standard. Using a mileage-tracking app and admin management tool helps keep records and ensures that reimbursements are calculated accurately.

Selecting the Right Fit

No single reimbursement method is perfect for every Alabama employer. Many businesses use a hybrid approach, offering TFCA or FAVR for regular high-mileage drivers while defaulting to CPM for occasional travelers. By taking into account your team’s driving patterns, administrative resources, and taxation goals, you can find a program—or combination of programs—that meets everyone’s needs.

Documentation & Payment Best Practices

All properly run mileage reimbursement programs have one thing in common: you have to keep detailed records! This first of all means mileage logs, or if you’re doing an actual expenses methodology, business receipts. To see all the things you need to include in your mileage log, check out this list: The Ultimate Guide to Mileage Tracking. 

The Bottom Line on Alabama Mileage Reimbursement

• State employees: must be reimbursed at the IRS rate (currently $0.70/mile) within 30 days of a valid claim.
• Injured workers (workers’ comp): must be reimbursed at the same $0.70/mile rate for travel to medical or rehab appointments.
• Private employers (general business travel): you don’t have a statutory obligation to reimburse, but offering mileage reimbursement can make your company more competitive in terms of talent recruiting and retention.

Ultimately, knowing when you’re legally required to reimburse mileage—and choosing whether to do so in other situations—can save you from compliance headaches and position your organization as a fair and supportive employer.

References & Further Reading

1. Ala. Code § 36-7-22 – Mileage allowance for persons traveling on official state business
2. Ala. Code § 25-5-77(f) – Workers’ compensation mileage reimbursement for medical and rehabilitation travel
3. Alabama Department of Labor Memo (December 28, 2023) – Clarifying workers’ compensation mileage rate alignment with state employee rates
4. Ramp’s Alabama Mileage Reimbursement Calculator – Helpful tool for computing reimbursement costs and comparing rates

Disclaimer

Disclaimer: Nothing in this blog post is legal, accounting, or insurance advice. Consult your lawyer, accountant, or insurance agent, and do not rely on the information contained herein for any business or personal financial or legal decision-making. While we strive to be as reliable as possible, we are neither lawyers, accountants, or agents. For several citations of IRS publications on which we base our blog content ideas, please always consult this article: https://www.cardata.co/blog/irs-rules-for-mileage-reimbursements. For Cardata’s terms of service, go here: https://www.cardata.co/terms.