Mileage Reimbursement Rules and Rates in Iowa

In Iowa, understanding mileage reimbursement rules is essential for state and private employers.

For state employees, Iowa Code §8A.363 makes mileage reimbursement mandatory. This law covers a range of personal vehicles—from cars and vans to pickups and panel trucks—used for official state business. Reimbursement is determined according to IRS guidelines. However, elected officers, judicial officers, and general assembly members are exempt from this mandate.

For private employers, while you’re not legally required to provide mileage reimbursement (except under specific circumstances like workers’ compensation claims), offering this benefit can be a valuable addition to your compensation package. Fair mileage reimbursement not only meets legal requirements under the Iowa Workers’ Compensation Act and ensures compliance with the Iowa Minimum Wage Law (Iowa Code 91D) but also helps keep employees happy, loyal, and more productive.

2025 Mileage Reimbursement Rates in Iowa

For state employees, the IRS-approved rate for 2025 is $0.70 per mile for business travel. This rate is part of a broader structure that also defines reimbursement for charitable and medical/moving miles. While private employers can set their own rates, any excess reimbursement over the IRS standard is considered taxable income (unless you run a FAVR program).

Below is a snapshot of Iowa’s mileage reimbursement rates over recent years:

This historical perspective helps both employees and employers understand the trends and annual adjustments that follow IRS guidelines.

The Legal Landscape in Iowa

Iowa Code §8A.363: State Employees

• It’s mandatory that mileage for state employees is reimbursed at the IRS standard rate.
• This includes reimbursement for personal cars, vans, pickups, and panel trucks.
• It requires prior approval from a director. In cases where employees have disabilities and require specially equipped vehicles, a higher rate may be approved.
• Elected officers, judicial officers, and general assembly members are exempt from this code.

Iowa Workers' Compensation Act

When an employee is injured at work, employers must cover mileage costs for travel related to medical appointments, reimbursing at the IRS business mileage rates. Denying or delaying these claims without a valid reason can result in penalties of up to 50% more in benefits.

Iowa Minimum Wage Law (Iowa Code 91D)

Although mileage reimbursement isn’t directly mentioned in the minimum wage law, failure to reimburse may effectively lower an employee’s wage below the required minimum. Employers must ensure that any shortfall is compensated—whether for regular employees or tipped workers.

There are allowances for newly hired workers under 20 years old during their first 90 days, and adjustments for tipped employees earning below the minimum wage.

Different Vehicle Reimbursement Programs in Iowa

Beyond complying with Iowa regulations, many companies look for comprehensive solutions that ensure fairness and cost efficiency in reimbursing mileage. One effective approach 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:

• 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.

Organizations with high-mileage drivers who want to pay employees accurately without incurring extra tax liabilities benefit the most from FAVR.

2. Tax-Free Car Allowance (TFCA)

A Tax-Free Car Allowance 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 remain tax-free.

Key features:

• 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 covering ownership costs.

Drivers who may not comply with FAVR but still need a consistent monthly allowance benefit the most from TFCA.

3. Cents per Mile (CPM)

Cents per Mile 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 straightforward—simply multiply the miles driven by the per-mile rate to determine the payment.

Companies with occasional drivers looking for minimal administration and easy compliance benefit from CPM. Employees who drive under 5,000 business miles per year often favor this method.

Read more on how to choose the right VRP:

​​Which Vehicle Reimbursement Programs Are Right for You?

Benefits of Fair Mileage Reimbursement

Implementing a fair mileage reimbursement policy is more than just a legal requirement—it’s a strategic business decision. Adhering to both state laws and IRS guidelines helps avoid potential fines and penalties. Timely and fair reimbursement boosts morale, reduces out-of-pocket expenses for employees, and encourages loyalty. Streamlining mileage tracking and reimbursement processes saves time and reduces administrative errors. Offering mileage reimbursement enhances your overall compensation package, making your business more attractive to top talent.

Conclusion

Iowa’s mileage reimbursement framework—anchored by Iowa Code §8A.363 for state employees and reinforced by the Workers’ Compensation Act for private employers—ensures that travel expenses are handled fairly and transparently. In 2025, with a business rate of $0.70 per mile, both public and private organizations have a clear benchmark to follow. Additionally, adopting a tailored Vehicle Reimbursement Program can further enhance fairness, cost efficiency, and overall employee satisfaction. Whether you’re managing state travel or considering mileage reimbursement as part of your employee benefits, staying informed and compliant is key to protecting your business and supporting your workforce.

References:

• Ramp Mileage Reimbursement Calculator for Iowa
• Iowa Code §8A.363 and related guidelines
• Iowa Workers’ Compensation Act and Iowa Code 91D
• Reimbursement | Iowa Department of Administrative Services
• Mileage Reimbursement | Iowa Ethics and Campaign Disclosure Board
• Iowa Reimbursemet | LLC