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Arizona gives private employers flexibility in how they reimburse employees who use personal vehicles for work.
There is no statewide Arizona cents-per-mile rate that most private employers must use.
Federal tax rules still matter, though, and many employers use the IRS standard mileage rate or another IRS-compliant reimbursement method.
Arizona also has separate rules for state employee travel and certain workers’ compensation medical travel.
Here’s what employers and drivers should know in 2026.
What Is the Arizona Mileage Reimbursement Rate for 2026?
Arizona does not establish a universal mileage reimbursement rate for private employers.
For federal tax purposes, the IRS publishes an optional standard mileage rate that employers often use as a benchmark when reimbursing employees for business use of a personal vehicle.
The IRS changed the business mileage rate during 2026:
- January 1 through June 30, 2026: 72.5 cents per mile
- July 1 through December 31, 2026: 76 cents per mile
The IRS initially set the 2026 business rate at 72.5 cents per mile. It later increased the rate to 76 cents for qualifying business transportation expenses incurred on or after July 1, citing recent increases in fuel prices.
The IRS standard mileage rate page confirms both 2026 rates, while IRS Announcement 2026-11 explains the midyear adjustment.
As of September 2026, 76 cents per mile is the current IRS business mileage rate.
That does not make 76 cents the mandatory Arizona mileage reimbursement rate. The IRS rate is a federal tax benchmark.
Do Employers Have to Reimburse Mileage in Arizona?
Arizona does not set a general statewide cents-per-mile reimbursement requirement for most private employers.
That gives companies flexibility in how they structure reimbursement for employees who drive personal vehicles for work.
Employers have flexibility in how they reimburse business driving, including mileage-based and other vehicle reimbursement programs.
Employers should still pay attention to their wage policies and any contractual reimbursement commitments. The Arizona Industrial Commission’s Labor Department allows employees to bring wage claims that can include unpaid mileage reimbursement when reimbursement is owed.
Arizona’s statewide minimum wage is also $15.15 per hour in 2026, effective January 1. The rate increased from $14.70 in 2025.
A clear mileage policy helps employers set expectations around which trips qualify, how mileage should be tracked, and how reimbursement will be calculated.
Does Arizona Require Employers to Use the IRS Mileage Rate?
No. The IRS standard mileage rate is optional.
The IRS uses the rate to calculate deductible vehicle costs and, in certain reimbursement arrangements, amounts that are treated as substantiated for federal tax purposes.
Employers can choose a reimbursement method that fits their workforce and complies with applicable tax requirements.
Some use a Cents-Per-Mile (CPM) program based on the IRS standard mileage rate, while others use Fixed and Variable Rate (FAVR) reimbursement or a Tax-Free Car Allowance (TFCA).
These programs calculate reimbursement differently.
Employers should consider business mileage, driver roles, geography, and vehicle costs when choosing an approach.
The right method depends on business mileage, driver roles, geography, and the costs employees face while driving for work.
When Is Mileage Reimbursement Tax-Free in Arizona?
Federal IRS rules largely determine the federal tax treatment of mileage reimbursement.
Under an accountable plan, an employer’s reimbursement arrangement must meet three requirements:
- The expense must have a business connection.
- The employee must adequately account for the expense within a reasonable period.
- The employee must return any excess reimbursement within a reasonable period.
When those requirements are met, qualifying reimbursements generally are not reported as employee pay.
Mileage rate and documentation also matter.
For mileage allowances, amounts paid above the applicable federal rate can result in taxable wages.
Publication 463 explains that the excess portion of a mileage allowance above the federal rate generally must be included in wages when the accountable-plan requirements otherwise apply.
FAVR follows its own IRS requirements, so it should not be evaluated solely by comparing reimbursement to the standard cents-per-mile rate.
Tax-free treatment comes from proper program structure and substantiation.
What Mileage Records Should Arizona Employees Keep?
Accurate records are important for reimbursement and tax compliance. IRS Publication 463 says vehicle records should support information such as:
- Mileage for each business use
- Date of the trip
- Business destination
- Business purpose
The IRS also emphasizes timely records. A mileage log, expense statement, diary, or similar record can support business vehicle expenses when maintained properly.
For employers, consistent mileage tracking creates a clearer record of business driving and reimbursement activity.
For drivers, it makes it easier to document qualifying trips without reconstructing them at the end of the month.
What Counts as Business Mileage in Arizona?
For federal tax purposes, business mileage generally involves vehicle use for a business purpose.
Examples can include driving from an office to a customer location, traveling between job sites, making service calls, or attending an off-site business meeting.
Ordinary travel between home and a regular workplace is generally treated as commuting rather than business transportation for federal tax purposes.
Travel involving temporary work locations can follow different rules depending on the circumstances. IRS Publication 463 provides additional guidance on commuting and transportation expenses.
Employers should define business and personal mileage clearly in their reimbursement policy so drivers know which trips to record.
What Is the Mileage Rate for Arizona State Employees?
Arizona state employees follow a separate travel reimbursement system.
Under Arizona Revised Statutes § 38-623, the Arizona Department of Administration sets state mileage reimbursement rates.
The department must consider IRS amounts when setting the rate, and changes require approval from the Joint Legislative Budget Committee.
The latest State of Arizona Accounting Manual Section 5095 currently published by the Arizona General Accounting Office lists a personal vehicle mileage reimbursement rate of 67 cents per mile, effective January 27, 2025.
The GAO’s current State of Arizona Accounting Manual index continues to list the January 27, 2025 version as its latest Section 5095 entry.
That state employee rate is separate from the IRS standard mileage rate and does not establish a private-employer rate.
Arizona law also states that when multiple state officers or employees travel together in the same private vehicle on official business, only one mileage reimbursement may be claimed for that vehicle.
Does Arizona Require Reimbursement for Workers’ Compensation Travel?
Arizona has a specific rule for certain workers’ compensation medical travel.
Under Arizona Revised Statutes § 23-1062, workers’ compensation medical benefits include reimbursement for reasonable travel expenses when an injured employee must travel more than 25 miles from their residence to receive medical care for the work-related injury.
This rule applies specifically to qualifying workers’ compensation travel.
It should be treated separately from an employer’s normal mileage reimbursement program for employees performing their regular job duties.
What Is the Average Car Allowance in Arizona?
Arizona does not establish a standard monthly car allowance for private employers.
Employers typically determine allowance amounts based on job responsibilities, expected business mileage, company policy, and their chosen reimbursement structure.
A flat car allowance also has tax implications.
IRS Publication 463 explains that reimbursement arrangements that do not satisfy accountable-plan rules are treated as nonaccountable plans, with the payments generally reported as wages.
That is one reason employers may choose a reimbursement method that ties payments more directly to substantiated business driving and vehicle costs.
Choosing a Mileage Reimbursement Program in Arizona
Arizona employers have several options for drivers who use personal vehicles for work.
Cents-Per-Mile (CPM) provides a set reimbursement for each substantiated business mile. It can work well for employees with lower or less predictable mileage.
Fixed and Variable Rate (FAVR) separates fixed ownership costs and variable operating costs. When the program and driver meet IRS requirements, it can support tax-free reimbursement while reflecting differences in driving costs.
Tax-Free Car Allowance (TFCA) uses an accountable-plan structure and substantiated business mileage to support tax treatment.
Some companies use a mixed reimbursement program, assigning different approaches to different driver populations.
A field salesperson driving thousands of miles each year may have different needs from an employee who makes only occasional customer visits. Program design should reflect those differences.
Make Arizona Mileage Reimbursement Easier to Manage
Arizona gives private employers flexibility in how they reimburse employees for business driving.
That makes program design especially important. Employers need a clear policy, reliable mileage records, an appropriate reimbursement method, and consistent administration.
Cardata helps businesses design and manage mileage reimbursement programs for employees who use personal vehicles for work.
Our fully managed approach combines mileage capture, reimbursement calculations, payments, compliance support, and reporting.
Whether your workforce uses FAVR, CPM, TFCA, or a mixed program, Cardata can help you build a reimbursement approach that fits your drivers, your policies, and your business.
Talk to Cardata to build a fair, accurate, and compliant mileage reimbursement program.
Talk to Cardata
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