Colorado Mileage Reimbursement Rules

Colorado employers, you should know the specifics of mileage reimbursement in the Centennial State. From state-mandated rates for official travel to specifics of how private employers can pay mileage, this blog post’s got you covered.

Reimbursement Rates for Colorado State Employees

Unlike most states, Colorado has its own spin on the classic IRS-rate based reimbursement for state employees. Colorado code CRS § 24-9-104 dictates that public officers and employees should receive:

• 90% of the IRS rate for standard (2WD) vehicles.
• 95% of the IRS rate for 4WD vehicles when those conditions are necessary (think rugged terrain, snowy passes, etc.) [1][2].

What are the Colorado Rates in 2025?

The IRS business mileage rate for 2025 is $0.70/mile. State employees would be entitled to one of the two following rates:

• For a 2WD vehicle, 90% comes out to $0.63 per mile.
• For a 4WD vehicle, 95% comes out to $0.67 per mile.

Why does Colorado do this? Colorado’s geography can be challenging—some parts of the state see extreme weather or off-road-like conditions. The slightly higher rate for 4WD is designed to compensate Coloradan employees fairly when they need more rugged vehicles for official state business [2].

Do Colorado Private Employers have to Pay Mileage?

For private business, is there a legal requirement to reimburse employees for everyday mileage? Generally, Colorado law does not force private employers to follow the exact state rate for business travel. However, there are a few reasons you might want to:

1. Meeting minimum wage guidelines.

Colorado’s minimum wage is $14.81/hour [1]. If employees spend significant time driving (and incurring vehicle expenses), reimbursing mileage can help ensure that their effective pay never dips below that floor.

2. Attracting and retaining talent 

Vehicle reimbursements can show your team that you respect their decision to drive personal vehicles for work and that you value their time on the road. A good reimbursement program can help attract and retain top field team talent.

Why the Specific 90% and 95% Rates?

Colorado’s approach (codified in CRS § 24-9-104) acknowledges that not all miles are created equal. Driving up a snowy mountain pass in a four-wheel-drive truck isn’t the same as zipping around Denver in a standard sedan. Hence, the slightly higher rate for 4WD acknowledges vehicle strain—while still pegged to the IRS guidelines.

It’s about fairness: paying staff enough to offset their additional fuel, maintenance, and depreciation costs, but also ensuring state finances are used responsibly [2][3].

Colorado Reimbursement Rates vs. the IRS Standard

IRS Standard vs. Colorado Mandates

• IRS Standard (2025): $0.70/mile for business travel
• Colorado State Employees:
  • $0.63/mile for 2WD (90%)
  • $0.67/mile for 4WD (95%)

For private employees, it’s technically optional to adopt these figures. However, many Colorado businesses voluntarily match or come close to the IRS standard rate—particularly if employees do a lot of driving. Doing so helps employees cover the real-world costs of fuel, repairs, and general vehicle wear.

Cents per Mile (CPM) vs. Other Programs

While many organizations automatically default to a Cents per Mile (CPM) approach, it’s worth noting that you can also explore:

• Fixed & Variable Rate (FAVR) programs, which separate fixed costs (insurance, depreciation) from variable costs (fuel, maintenance).
• Tax-Free Car Allowances, which provide a monthly stipend but must follow specific IRS rules to remain fully tax-free.

If you’re interested in these approaches, check out resources like Cardata’s overview of FAVR programs or their Tax-Free Car Allowance program to see whether these might be a better fit for your team.

Documentation & Best Practices

No matter how you handle mileage, thorough record-keeping is critical. This begins with maintaining accurate mileage logs, which should include odometer readings, dates, and the specific business purposes of each trip. Digital tools can simplify these tasks and help prevent errors, ensuring your records remain both consistent and transparent.

It is also important to maintain clear policies regarding mileage reimbursement. Let your employees know if you use different rates for two-wheel drive versus four-wheel drive, or if you apply a single rate for all personal vehicles. Having a transparent policy helps avoid confusion and fosters trust within your organization.

Finally, stay mindful of both local and federal regulations. You are not legally required to follow Colorado’s formula as a private employer, but you have to still comply with relevant federal wage rules. Ensure total compensation, regardless of if it includes mileage reimbursement, does not fall below the required hourly wage of $14.81.

The Bottom Line on Colorado Mileage Reimbursement

• State Employees: Must be reimbursed at 90% of the IRS rate for 2WD (currently $0.63/mile for 2025) and 95% of the IRS rate for 4WD (currently $0.67/mile), per CRS § 24-9-104 [2][3].
• Private Employers: You’re not legally bound to match the state approach, but it’s often wise to at least follow the IRS standard or something close to it. Doing so keeps wages above minimum thresholds and shows you respect your team’s expenses.
• Minimum Wage: At $14.81/hour [1], mileage reimbursement is a valuable tool to ensure staff remain comfortably above that line, especially if they’re on the road a lot.

Knowing how Colorado mileage reimbursement works—and choosing whether to align with the state’s 90%/95% guidelines—can prevent confusion, foster worker loyalty, and help you avoid wage-and-hour pitfalls. It’s all about good business sense and fairness in a state where the roads can be anything but flat and predictable!

References

1. Ramp – Colorado Mileage Reimbursement Calculator
2. Office of the State Controller – Mileage Reimbursement Rate
3. University of Colorado PSC Communicator – Increase to Mileage Reimbursement Rates for 2024

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.