Hawaii Mileage Reimbursement 2026: Laws, IRS Rate & Employer Rules

When employees use their personal vehicles for work in Hawaii, the mileage reimbursement rules depend on who they work for and why they’re driving.

Private employers generally have flexibility in how they reimburse ordinary business mileage. 

Hawaii state employees follow separate rules for authorized personal-vehicle use, while workers’ compensation medical travel has its own reimbursement requirements.

The federal benchmark also changed during 2026. The IRS business mileage rate is 72.5 cents per mile from January 1 through June 30, 2026, and 76 cents per mile beginning July 1.

Here’s what Hawaii employers and employees should know about mileage reimbursement in 2026.

What Is the Hawaii Mileage Reimbursement Rate for 2026?

Hawaii does not have a mandatory mileage reimbursement rate that applies to ordinary business driving by every private-sector employee.

For private employers, the IRS standard mileage rate is a common benchmark.

According to the IRS standard mileage rate table, the 2026 business mileage rates are:

• January 1 through June 30, 2026: 72.5 cents per business mile
• July 1 through December 31, 2026: 76 cents per business mile

The IRS increased the rate mid-year following recent increases in fuel prices. 

The revised rate applies to qualifying business transportation expenses paid or incurred on or after July 1, 2026.

The IRS rate is optional for private employers. 

A company can use it as the basis for a Cents-Per-Mile reimbursement program or choose another reimbursement methodology that reflects its employees’ business mileage and vehicle costs.

Do Private Employers Have to Reimburse Mileage in Hawaii?

Hawaii does not establish a general per-mile reimbursement rate that private employers must use for ordinary business driving.

That gives companies flexibility in how they reimburse employees who use personal vehicles for work. 

A business might use the IRS rate, establish another CPM rate, or use a mileage reimbursement program based on the real, business-required costs employees incur.

Employers should also consider any reimbursement obligations created through employment agreements, collective bargaining agreements, or written company policies.

Workers’ compensation medical travel is a separate situation. 

Hawaii specifically provides travel reimbursement when an injured employee must obtain qualifying medical treatment.

When Can Mileage Reimbursement Be Tax-Free in Hawaii?

Mileage reimbursement can generally receive tax-free treatment when it is paid through an arrangement that satisfies IRS accountable-plan requirements.

Under IRS Publication 463, an accountable plan generally requires:

1. The expense must have a business connection.
2. The employee must adequately account for the expense within a reasonable period.
3. The employee must return any excess reimbursement or allowance within a reasonable period.

Employees should maintain records showing details such as the date, destination, mileage, and business purpose of each trip.

Using the IRS standard mileage rate does not automatically make a reimbursement tax-free. 

The reimbursement arrangement and supporting documentation also need to meet applicable IRS requirements.

When an accountable mileage allowance exceeds the applicable federal rate, the excess can generally be treated as wages.

What Counts as Business Mileage in Hawaii?

Business mileage generally means driving required for a legitimate work purpose rather than an employee’s ordinary commute between home and a regular workplace.

Examples can include traveling from an office to a customer location, driving between work sites during the day, making service calls or deliveries, and traveling to certain temporary work locations.

Under federal tax rules, ordinary commuting between home and a regular workplace is generally treated as personal travel.

Hawaii’s state travel rules make a similar distinction. Under Hawaii Administrative Rules § 3-10-13, transportation between an employee’s home and regular place of business generally is not official business.

There are exceptions. With appropriate approval, an employee traveling directly from home to another job site may be reimbursed for mileage that exceeds the employee’s normal commute. 

Different rules can also apply to approved travel outside normal working hours.

Clearly defining business versus personal vehicle use can help employees track qualifying mileage consistently.

How Does Hawaii State Employee Mileage Reimbursement Work in 2026?

Hawaii has its own framework for employees who use personal vehicles on official state business.

Under Hawaii Administrative Rules § 3-10-13, a department head or authorized representative can approve personal-vehicle use when a publicly owned vehicle is unavailable or impractical to use.

The rule also says that, for employees whose rate is not otherwise established by law, the automobile mileage allowance is set for each fiscal year beginning July 1 at the highest rate lawfully applicable to a state officer or employee on that date.

That timing matters when looking at mileage reimbursement in 2026.

For the state fiscal year ending June 30, 2026, Hawaii’s mileage allowance remained governed by the rate established for that fiscal year under HAR § 3-10-13. 

The rule does not automatically reset the state mileage allowance when the IRS changes its rate during the fiscal year.

For the new fiscal year beginning July 1, 2026, the IRS business mileage rate in effect on that date is 76 cents per mile.

Hawaii DAGS also issued Comptroller’s Memorandum No. 2026-15 after the IRS mid-year adjustment. 

The memorandum confirms the revised IRS business mileage rate of 76 cents per mile beginning July 1, 2026, which is relevant for employees whose reimbursement arrangements follow IRS-issued rates.

For employees whose mileage reimbursement is governed by HAR § 3-10-13 and is not otherwise set by law or agreement, the fiscal-year framework is the key rule to follow.

Collective bargaining agreements or other governing rules can affect the reimbursement arrangements for specific employees, so state agencies should apply the provisions that govern the employee involved.

Employees using a personal vehicle for state business must also carry the liability insurance required under Hawaii law. 

The rule includes requirements for recording and reporting mileage associated with official business.

What Is the Hawaii Workers’ Compensation Mileage Rate for 2026?

Hawaii workers’ compensation rules provide travel reimbursement when an employee is required to obtain medical treatment for a work-related injury.

Under Hawaii Administrative Rules § 12-10-25, an employee required to obtain medical treatment is entitled to qualifying travel reimbursement.

The rule directs employees to use public transportation when possible. 

When public transportation is not practical because of an employee’s physical condition, the nature of the injury, or geographic location, travel by the most direct route can qualify for reimbursement.

For medical visits made before or after work or during working hours, reimbursement generally applies only to mileage outside the employee’s normal route.

Most importantly, the rule says mileage reimbursement is made according to Hawaii state government standards.

That means workers’ compensation mileage should follow the applicable Hawaii state mileage standard rather than assuming the current IRS business rate applies in every situation.

Because Hawaii’s state mileage framework operates on a fiscal-year basis and reimbursement arrangements can vary under applicable rules or agreements, employers and employees should verify the state government standard applicable on the date of the workers’ compensation travel.

The Hawaii Department of Labor and Industrial Relations also advises injured workers to keep records of mileage and transportation expenses associated with medical treatment.

What Mileage Reimbursement Options Can Hawaii Employers Use?

Private employers have several ways to reimburse employees for the real, business-required costs of using personal vehicles for work.

Cents-Per-Mile (CPM)

Cents-Per-Mile reimburses employees at a set amount for each qualifying business mile.

An employer can use the IRS standard mileage rate or establish another appropriate rate. CPM can work well for occasional drivers because reimbursement directly follows documented business mileage.

Fixed and Variable Rate (FAVR)

Fixed and Variable Rate reimburses employees for the real, business-required fixed and variable costs of owning and operating their personal vehicles for work.

Fixed costs can include insurance, depreciation, registration, and related ownership expenses. Variable costs can include fuel, tires, and maintenance.

Separating these costs allows reimbursement to account for differences in both business mileage and geographically variable expenses.

That can be especially relevant in Hawaii, where vehicle operating costs can vary by location.

FAVR is an IRS-recognized mileage allowance methodology with specific requirements. 

Employers using FAVR should make sure their programs meet the applicable IRS rules for tax-free treatment.

Tax-Free Car Allowance (TFCA)

A Tax-Free Car Allowance is an accountable reimbursement arrangement designed around the real, business-required costs employees incur when using personal vehicles for work.

Tax-free treatment depends on satisfying applicable accountable-plan requirements, including substantiating business expenses and appropriately handling excess reimbursements.

Employers with different driver populations can also use a mixed mileage reimbursement strategy. 

For example, FAVR can support employees who drive substantial recurring business mileage, while CPM can work well for employees who drive less frequently.

How Should Hawaii Employers Manage Mileage Reimbursement?

A clear mileage reimbursement policy should explain which trips qualify, how mileage is recorded, which reimbursement methodology applies, and when payments are processed.

Accurate mileage records also support accountable-plan requirements and give Finance, HR, and Operations teams better visibility into business driving and reimbursement costs.

Employers should review their programs regularly because federal and state mileage rules can change on different schedules. Hawaii is a useful example. 

The IRS moved from 72.5 cents to 76 cents per mile on July 1, 2026, while Hawaii’s state travel rule operates on a fiscal-year framework beginning July 1.

Companies should clearly identify whether their reimbursement policy follows the IRS rate, a company-specific rate, FAVR, TFCA, or another methodology so employees understand how their reimbursement is calculated.

Build a Mileage Reimbursement Program That Fits Your Hawaii Drivers

Hawaii private employers have flexibility in how they structure ordinary business mileage reimbursement, while state employee travel and workers’ compensation medical mileage follow more specific rules.

The right approach depends on how often employees drive, where they drive, and the real, business-required costs associated with using their personal vehicles.

Cardata helps companies design and manage mileage reimbursement programs, including FAVR, CPM, TFCA, and mixed programs for different driver groups. 

From mileage capture and reimbursement calculations to compliance support and direct-to-driver payments, Cardata helps make mileage reimbursement simpler for employees and easier for Finance, HR, and Operations teams to manage.

Talk to Cardata about building a mileage reimbursement program for your Hawaii drivers.