Skip to main content

Team Cardata

4 mins

Mileage reimbursement laws in New Jersey 

Hero

Mileage reimbursement is a fundamental element of work for many employees and employers, especially when personal vehicles are used for business travel. In New Jersey, while there isn’t a state-specific mandate for employers with employee drivers, it’s important to understand how federal rules, regulations, and best practices come into play. This blog will walk you through the ins and outs of mileage reimbursement in New Jersey, including related tax laws, employer responsibilities, and practical tips.

Federal vs state requirements

Federal guidelines

At the federal level, the IRS has set the standard mileage rate, which in 2024 is $0.67 cents per mile. This rate is used for calculating the deductible costs of driving a personal car for business purposes. The IRS rate is based on the fixed and variable costs of driving a vehicle. For employers, following the IRS standard mileage rate ensures that reimbursements remain non-taxable. [1] [2]

New Jersey state regulations

In New Jersey, there are no laws requiring private sector employers to reimburse employees for mileage. However, state employees receive a mileage reimbursement rate of $0.31 cents per mile when using personal vehicles for work related business. This rate covers travel expenses like gas and insurance. [3]

Why should employers consider mileage reimbursement

Legal considerations

Although the New Jersey government doesn’t mandate mileage reimbursement for employees who drive their personal vehicles for work, there are federal “rules and regs” to consider. The Fair Labor Standards Act ensures that business expenses, like mileage, do not reduce an employee’s earnings below the federal minimum wage. This makes it vital for employers to provide adequate mileage reimbursement to avoid legal complications. [4]

Employee satisfaction

Reimbursing mileage can significantly impact employee morale, and thereby impact a company’s attrition rate. When employees are fairly compensated for their travel expenses, it promotes a positive work environment and can help retain top talent.

Reimbursement methods

Standard mileage rate

Some employers choose the IRS standard mileage rate, or just “the standard rate”, to achieve and maintain compliance. This method is straightforward and ensures that reimbursements are tax free, provided they do not exceed the IRS rate.

Alternative methods

Many employers opt for alternative reimbursement methods, like the Fixed and Variable Rate (FAVR) system. FAVR is tax free and combines fixed and variable elements into its reimbursement sum. Elements like license and title fees, depreciation, gas, insurance, and more. This system offers a more customizable reimbursement. Alternatively, car allowances provide flexibility but are fully taxable, which might not be the most fiscally efficient method.

Best practices for employers

Choosing the right method

When selecting a reimbursement method, it’s important to consider factors like administrative ease, fairness, and compliance with IRS guidelines. The chosen method should align with the company’s policies and the specific needs of the employees.

Record-keeping requirements

Meticulous record-keeping is essential for tax purposes and for maintaining compliance. Employers should maintain detailed records of each trip their employees make, including the purpose, starting and ending points, dates, odometer readings, etc. This ensures that all reimbursed travel expenses are well-documented and could, hypothetically, satisfy an IRS audit.

Employee communication

Clear communication with employees about reimbursement policies is vital for adoption and cooperation. Ensure that all employees understand how to track their mileage, as well as the procedures for submitting reimbursement requests.

Conclusion

While mileage reimbursement might seem like a minor detail, it plays a significant role in employment law and employee satisfaction. New Jersey might not require private employers to provide mileage reimbursement, but following the IRS standard mileage rate and maintaining good practices can prevent legal issues and enhance employee morale. For personalized advice, consulting with a tax, finance, or HR expert is always a good bet.

By staying informed and proactive about mileage reimbursement, employers can ensure compliance, keep employees happy, and manage travel expenses effectively throughout the calendar year.

Set up an appointment with us to learn more about reimbursement programs.

Sources

[1] IRS.gov 

[2] Automatic mileage tracker | MileIQ

[3] Labor Law Center

[4] TripLog

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.

Share on:

Come along for the ride