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Our PageWhile Detroit’s heyday as the economic—and automotive—center of American life belonged more to the last century than to this one, it’s still a great place to drive for work or leisure, and one that’s still proud of its many automotive workers, unions, and manufacturers.
Because of that, you’re probably used to dealing with some sort of car allowance or mileage replacement for work, either for yourself or the employees you manage.
Long known as the heartland of the United States’ legendary automotive industry, we’ve put together a guide to understanding Michigan’s state requirements for mileage reimbursement in the Motor City and beyond.
What is the mileage reimbursement rate for Michigan?
There is no specific state mileage rate in Michigan. However, many organizations both public and private have recourse to the IRS standard rate. Some statal organizations, like the Judiciary, are entitled to reimbursement.
According to this January 3rd bulletin by the Michigan Supreme Court,[1] employees of the Judiciary are entitled to:
- 44 cents per mile for ‘standard’ business driving (based on the average cost to drive a mid-sized vehicle in Michigan)
- There is also a premium rate of 65.5 cents per mile, the same as the Internal Revenue Service’s standard cents per mile rate, if certain conditions are met.
Am I legally required to offer this mileage reimbursement rate as a Michigan business owner?
In short, no. These are guidelines for state government employees working on behalf of the State of Michigan. You are free to offer any mileage reimbursement rate you please, although you will be taxed for every cent you offer above the IRS’ standard 65.5 cents per mile rate (as of January 1st, 2023).
But just because something hasn’t been codified into law doesn’t make it irrelevant. There’s no law anywhere in the country saying you have to hold a door open for someone else as you pass through it, yet people do it without a second thought, many times per day.
If a business practice is adopted widely enough to be considered ‘standard’, it might as well be. While there are always options to save money while providing competitive automotive reimbursement plans, it will be difficult to attract reliable talent without offering some measure of employee reimbursement. You’re essentially leaving a lot of work to your drivers at tax time if you don’t have a reimbursement program. Employees love reimbursements for business driving.
What’s the average mileage reimbursement rate in Michigan?
The average mileage reimbursement payment in Michigan is often slightly higher than the $600 national average. However, every driver’s circumstances are different: your mileage may vary!
Here’s why that could be the case:
- Michigan’s location in the upper Midwest is removed from the logistical hubs for oil and gasoline, which tend to be concentrated around major transportation arteries through the Gulf states
- The state’s long history of investment and employment in the automotive industry might drive up costs in the sector long-term
- Since Michigan is reliant on imports for food, like most northern states, the hidden cost of fuel for transport inflates consumer good costs, which raises the overall cost of living
- Car culture is big in Michigan. It’s possible that Michiganders prize shiny new vehicles even more than people living in other car-friendly states. Keeping up with the Joneses, who all drive fresh-off-the-lot Fords
What do Michigan’s tax laws say about mileage reimbursement?
Watch this space, but for now, there are no specific tax laws on the Michigan state records designating a state mileage reimbursement late.
When there’s no state law, we can turn to the IRS for guidance. The standard federal business driving rate for 2023 is 65.5 cents per mile.
Following their rules about standard mileage reimbursement rates won’t steer you wrong. But they aren’t the most straightforward to understand, given that there are multiple different methods of reimbursement to choose from, each with their own tax procedures and compliance measures.
What are Michigan’s labor laws concerning mileage rate reimbursement?
The good news is that there exist no specific labor laws that dictate a standard mileage rate reimbursement for the State of Michigan.
Employers are not required by law to compensate drivers for business-related travel using a personal vehicle[3].
How often does Michigan update its state standard mileage reimbursement rate?
Michigan will likely remain pegged to the IRS federal rate, which changes once or twice a year.
So far, we’re not seeing any signs the IRS intends to lower the standard mileage reimbursement rate of 65.5 cents per mile it set in January of 2023, and we can expect the Michigan premium rate to stay pegged to that benchmark rate, at least for now.
The IRS has two periods per year when it announces a rate change, in January and June. But often, like in 2023, there’s only one rate change announcement per year.
If you want live updates any time the Michigan mileage rate up for review, sign up for Cardata’s newsletter at the bottom of this page. We cover every IRS rate update, plus we’ve got you covered with additional tips for reimbursement managers looking to maximize their budgets quarter by quarter.
Do I need to offer a mileage reimbursement if my employees live in Michigan?
The laws of competition and supply-and-demand are two of the bedrocks of American economic innovation.
While there is no legal requirement to do so, if you’re not offering some sort of reimbursement plan to cover your drivers’ expenses, your competitors probably are.
Any employee driver plan that doesn’t include some measure of car allowance, whether FAVR, Tax-Free Car Allowance or otherwise, might make it hard to hire happy employees to rely on.
And your business is only as good as its least happy employee, as the adage goes. At least according Henry Ford, who might know a thing or two about doing business in the state.[5]
Conclusion
Michigan is one of the states whose state institutions set their own reimbursement rate for state government employees, with occasionally an additional ‘premium’ rate pegged to the IRS Federal benchmark. While there’s no law on the books compelling you to do the same, doing so means you’re likely to attract employees you can rely on.
Set up an appointment with us to learn more about reimbursement programs.
We log the miles for you so you can keep your eyes on the road.
[1] Michigan Supreme Court Finance Department
[2] Mileage Reimbursement Guidelines for the State of Michigan
[3] Michigan’s (MI) Mileage Reimbursement Law Regulations Explained | Labor Law Education Center
[4] 21 Quotes From Henry Ford On Business, Leadership And Life
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 nor 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.
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