Idaho Vehicle Reimbursement Rules and Laws

Mileage Reimbursement

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Idaho typically does not require private companies to reimburse mileage, but there are specific situations where employers have to cover costs, like requirements under Workers’ Compensation. There are also vehicle reimbursement programs (VRPs) that companies in Idaho can implement to pay their employees.

Reimbursement Requirements for State Employees

Section 67-2004 of the Idaho Code says that state employees have a right to reimbursement when they drive their personal vehicles for state business. Currently, the approved rate stands at $0.70 per mile for the 2025 tax year (1).

State policy mandates reimbursement for only the shortest practical route. And, if a state-owned vehicle was readily available, but an employee chose to use a personal car instead, the mileage reimbursement rate can be reduced. This makes sure that state resources are used efficiently while compensating employees fairly for necessary personal vehicle use.

Workers’ Compensation and Medical Travel

Private-sector employers in Idaho are not generally obligated to reimburse mileage for work travel. However, the one big exception is Workers’ Comp: when an employee sustains a job-related injury and requires medical attention, you have to reimburse their mileage to appointments.

Idaho Codes 72-432 and 72-433 require employers to pay for an injured employee’s medically necessary travel, minus the first 15 miles of any round trip (1). This coverage ensures that injured workers can access appropriate medical care without bearing excessive travel costs.

Private Employers and Mileage Reimbursement

Apart from the exceptions above, private employers in Idaho typically have no statutory requirement to offer mileage reimbursement. Many still voluntarily adopt a reimbursement plan, such as:

IRS Standard Mileage Rate: Following this guideline simplifies record-keeping and ensures that payments up to the standard rate are tax-free.
Vehicle Reimbursement Programs (VRPs): Companies may implement data-driven solutions that tailor reimbursements to employee driving habits. This can include Fixed & Variable Rate (FAVR), Tax-Free Car Allowance (TFCA), or Cents per Mile (CPM)—all of which can be fully tax-free under certain conditions.

Offering a fair vehicle reimbursement plan can boost employee morale and reassure workers that using their personal vehicles will not reduce their take-home pay.

Minimum Wage Considerations

Idaho’s minimum wage is currently $7.25 per hour (2). In some cases, travel costs could lower an employee’s effective pay below this threshold. If that happens, employers may need to reimburse travel expenses to meet minimum wage requirements.

Policies at Notable Idaho Institutions

Two key Idaho organizations, the Idaho Education Association (IEA) and the University of Idaho, illustrate how different bodies handle mileage reimbursement:

Idaho Education Association (IEA): Sets its mileage rate four cents below the IRS figure, adjusting each fiscal year (3).
University of Idaho: Aligns its mileage reimbursement rate with that approved by the State of Idaho Controller’s Office (4).

These examples show that institutions often adapt state or IRS guidelines.

Different Vehicle Reimbursement Programs

Beyond complying with Idaho regulations, many companies look for comprehensive solutions that ensure fairness and cost efficiency. One effective route is to adopt a Vehicle Reimbursement Program (VRP) tailored to your employees’ needs. Below are three primary VRPs.

1. Fixed & Variable Rate (FAVR)

FAVR programs combine two components—fixed payments to cover ownership costs (insurance, depreciation, etc.) and variable payments tied to mileage (fuel, maintenance, etc.). By pairing regional cost data with actual mileage, FAVR ensures that each driver receives a fair, data-driven, and entirely tax-free reimbursement. Key features include:

Even if you exceed the IRS standard rate, FAVR remains tax-free when administered properly.
Prevents over- or underpayment by precisely accounting for real driving costs.
Built-in guardrails ensure each reimbursement meets IRS guidelines.

Who benefits most: Organizations with high-mileage drivers who want to pay employees accurately without incurring extra tax liabilities.

2. Tax-Free Car Allowance (TFCA)

A Tax-Free Car Allowance (TFCA) is an accountable plan that offers flexibility in setting a fixed reimbursement for work-related travel. With the right mileage capture software, any amounts paid at or below the IRS standard mileage rate stay tax-free.

Fewer compliance requirements compared to FAVR.
If the total payment to a driver exceeds what the IRS would allow (rate × business miles), only the difference is taxed.
Employers can lock in a portion of reimbursement for budgeting purposes.

Who benefits most: Occasional or lower-mileage drivers who still need a monthly allowance.

3. Cents per Mile (CPM)

Cents per Mile (CPM) pays drivers a set rate per mile they travel for business. As long as you stay at or under the IRS standard rate, the reimbursement is tax-free. This method is the simplest:

Multiply miles driven by the per-mile rate to determine payment.
Employees who drive under 5,000 business miles per year often favor CPM.

Who benefits most: Companies with occasional drivers looking for minimal administration and easy compliance.

Choosing the Right Program

Selecting the right VRP often involves analyzing your workforce’s driving patterns, budget constraints, and administrative capabilities. Here are some considerations:

Driver Mileage: High-mileage drivers typically benefit from FAVR, while occasional drivers often fit CPM.
Budget & Tax Efficiency: TFCA offers predictable monthly allowances with minimal compliance overhead.
Fairness & Accuracy: FAVR’s data-driven approach ensures the most precise reimbursements, but requires careful record-keeping.