Alaska Mileage Reimbursement Rules

Alaskan employers, listen up! Mileage reimbursement may not be everyone’s favorite dinner table topic, but in the Last Frontier, it’s important to know the specific rules. Even though Alaska doesn’t require private employers to pay mileage for everyday business travel, certain mandates apply when it comes to state employees and workers’ compensation.

Read on to learn how mileage reimbursement works in the 49th state.

Reimbursement for Alaska State Employees

The official guidelines for Alaska state employees who use privately owned vehicles can be found in Policy AAM 60.140.[1] Basically, if you’re traveling on state business, you get reimbursed at the IRS standard rate—currently $0.70 per mile for 2025. That rate is updated annually and typically follows the IRS’s lead.

Under Sec. 39.20.130 of the Alaska Statutes, mileage for state employees can’t exceed the amount set by the commissioner of administration.[2] This ensures a fair, consistent system for anyone driving on official state business.

A few more details to keep in mind:

• State reimbursement usually caps if the personal vehicle ends up costing more than a more economical option (like a rental car).
• Commuting (like driving to your usual office) normally doesn’t qualify for mileage reimbursement.
• For employees traveling with a personal vehicle instead of using State-provided transportation, the law may only reimburse you for whichever mode is cheaper.

All this ensures that state employees get consistent repayment for using their own vehicles—without saddling the state with unnecessarily high travel bills.

Workers’ compensation

The biggest imperative around mileage reimbursement is found under Section 8 AAC 45.084 of Alaska’s Workers’ Compensation Act. This regulation says that if one of your employees is injured on the job, you have to reimburse mileage for travel to and from medical or rehab appointments.[3]

The rate for these medical trips is the same as the state employee rate, $0.70 per mile for 2025. So even though you don’t have to reimburse everyday business travel (like sales calls or field work), you must compensate for any medical travel that stems from a workplace injury.

Private employer reimbursement

Let’s say you have Alaskan employees who regularly drive for normal, day-to-day business tasks. Do you have to reimburse them? In a word, no. The state doesn’t force private employers to offer mileage reimbursement.

But before you ditch the idea completely, consider these points:

1. Paying back employees for their travel costs helps you stand out as a supportive employer—important in a talent-scarce economy (especially in remote parts of Alaska). With the high cost of living in many parts of Alaska, a mileage reimbursement program can be a real difference-maker when it comes to retaining staff. Offering reimbursement could improve your employer image.
2. Right now, Alaska’s minimum wage is $11.91/hour. If employees absorb a bunch of vehicle expenses, their effective hourly rate can accidentally drop below that threshold. Offering mileage reimbursement helps avoid wage issues, since employees are entitled to receive either the Statal or Federal minimum wage, whichever is higher.[4] 

Heads up: if you decide to reimburse above $0.70/mile for business travel, that extra amount is usually taxable for your employees.

Choosing a reimbursement program

When you want to go beyond the standard IRS rate (or even if you stick with it), you have a few solid options. Each program has its own flavor:

Fixed & Variable Rate (FAVR)

A Fixed & Variable Rate (FAVR) plan separates your employees’ fixed costs (insurance, depreciation) from their variable costs (fuel, maintenance). You end up paying a data-driven amount tailored to each driver’s actual expenses, and the reimbursements can be completely tax-free if administered correctly. It’s perfect for high-mileage drivers in far-flung corners of Alaska. There are compliance measures for FAVR, however, that you need to be aware of. 

Tax-Free Car Allowance (TFCA)

A Tax-Free Car Allowance (TFCA) gives employees a flat payment (e.g., a monthly stipend) that can be 100% tax-free, provided it’s set up within IRS guidelines. It’s easier to administer than FAVR (fewer moving parts), but still shows your employees you have their backs on travel costs.

Cents per Mile (CPM)

A classic Cents per Mile (CPM) program is straightforward: employees track their mileage and you pay them x cents for each mile driven. Many companies use the IRS standard—$0.70 for 2025—but you can customize. Any amount up to the IRS rate is tax-free. This approach is typically best for occasional or low-mileage drivers.

Pro tip: use a hybrid approach—where you use CPM for part-time drivers and FAVR or TFCA for full-timers—can be a sweet spot.

Documentation & Payment Best Practices

No matter which route you choose—FAVR, TFCA, CPM—you’ll want to keep solid records. What all the programs have in common is they need to be substantiated with mileage logs or other business records. Consider using a digital mileage-tracking app to make things easier (and to keep your employees honest!). Proper documentation also matters if you ever face an audit or a workers’ comp dispute.

The Bottom Line on Alaska Mileage Reimbursement

• State employees: must be reimbursed at the IRS rate (currently $0.70/mile in 2025) for official business travel. Alaska’s policies (Policy AAM 60.140 and Sec. 39.20.130) provide additional details.
• Injured workers (workers’ comp): have to be compensated at the same $0.70/mile rate for medical travel related to workplace injuries—no exceptions.
• Private employers: you aren’t legally required to reimburse mileage, but it’s a major plus. It can keep you on good terms with your team, help prevent wage issues, and show that your company respects employees’ time and expenses.

Ultimately, clarifying when you have to reimburse (state rules, workers’ comp) and when you might want to reimburse (private business travel) can save you legal headaches and position your business as an employer of choice in Alaska.

Setting up mileage reimbursement the right way can be a game-changer for your employees and your bottom line. And in Alaska—where distances can be long and roads can be few—taking care of mileage details is more than just compliance. It’s a statement that you appreciate your employees and the miles they put in to grow your business.

References & Further Reading

• [1] Policy AAM 60.140 – Privately Owned Vehicles Guidance (PDF)
• [2] Alaska Stat. § 39.20.130 – Mileage allowance for state officials and employees
• [3] Ramp’s Alaska Mileage Reimbursement Calculator – Quick and easy way to estimate costs
• Ibid. – Section 8 AAC 45.084 – Workers’ compensation mileage reimbursement
• [4]  Minimum Wage | U.S. Department of Labor 
• Alaska Minimum Wage Info – Department of Labor & Workforce Development

Disclaimer

Nothing in this blog is legal, accounting, or tax advice. If you have specific questions about the legal or accounting implications of mileage reimbursement, consult an attorney or a qualified accountant. We’ve done our best to be accurate, but always verify details with the relevant state and federal sources. For more IRS-related guidance, consider reading this article from Cardata, and for Cardata’s terms of service, head over to this link.