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Mileage reimbursement in Washington state

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If you live in Washington State and you’re an employee using your personal vehicle for work, this blog is for you. Or, maybe you’re an employer who has a lot of drivers using their personal vehicles on your payroll, in which case, this blog is also for you.

In Washington State, understanding the nuances of mileage reimbursement is very important because there are many to know. We’ll cover the basics of mileage reimbursement, the IRS standard rate, alternative reimbursement methods in lieu of the IRS standard rate, as well as some best practices for smart and accurate record-keeping.

The federal IRS standard mileage rate

IRS Standard Mileage Rate

The IRS, which is the US federal tax body, sets a standard mileage rate every year to reimbursement for those driving their personal vehicles for business travel. For 2025, the standard mileage rate is the following:

  • $0.70 cents per mile driven for business use, up 1.5 cents from 2023.
  • $0.21 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, a decrease of 1 cent from 2023.
  • $0.14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2023. [1]

The IRS standard mileage rate covers both fixed and variable elements, including:

  • Depreciation
  • Insurance
  • Gasoline
  • Oil
  • Maintenance and Repairs
  • Tires
  • Registration and Fees

Following this rate means reimbursements are non-taxable, provided they do not exceed the IRS guidelines​ of $0.67 per mile. [2] [3]

Washington state specifics

State level reimbursement rates

Washington State, much like the rest of the United States, does not require specific mileage reimbursement rates for private industry employees who use their personal vehicles for work. However, many employers choose to align their policies with the IRS standard mileage rate. [2] [3]

That being said, however, the Fair Labor Standards Act (FLSA) does mandate that employees’ expenses incurred on the job should not bring an employee’s wages below the federal minimum wage, which is presently $7.25. So, if an employee incurs enough job-related costs to diminish their hourly earnings to below the federal minimum wage, then under FLSA, the employer is responsible to reimburse to at least recoup the difference for the employee. [4]

Alternative reimbursement methods

Fixed and Variable Rate (FAVR)

Fixed and variable rate (FAVR) is a tax-free vehicle reimbursement program that combines both fixed and variable elements of reimbursement. Some of these elements include license and title fees, depreciation, gas, insurance, and more. This system offers the most equitable reimbursement for employees, and can be the least administratively cumbersome when paired with a vendor who runs the FAVR program for you externally. [2]

Cents per Mile (CPM)

CPM is a basic program that reimburses employees based on the number of miles driven, similar to the IRS standard mileage rate, but can be customized by the employer at his or her discretion. It typically overpays high-mileage drivers and underpays lower mileage drivers, so it isn’t the most equitable. This method is straightforward, but should align with federal and state guidelines to ensure non-taxable status for optimal reimbursements.

463/TFCA

A tax-free car allowance (TFCA), or 463 Accountable Allowance, is an IRS-compliant method of reimbursement that allows businesses to offer a predetermined reimbursement to their drivers with the potential to be 100% tax-free.​ [2] [3] 

Best practices for employers

Accurate record-keeping

For accurate mileage reimbursement in Washington State, maintaining detailed records is critical. A proper mileage log should include:

  • The date and business purpose of each trip
  • A starting and ending odometer reading
  • The number of miles driven
  • The locations visited

Records and documents that accurately reflect the reimbursable trips help to ensure compliance and accurate reimbursement. [2] [3]

Clear communication and policies

Employers should always ensure a clear understanding of their reimbursement policies to employees. This should include how to track mileage, submit expense reports, as well as any of the other components of the reimbursement process. Providing training and resources can help employees comply with company policies and receive the reimbursement they require.

FAQs on mileage reimbursement in Washington state

Is mileage reimbursement taxable in Washington?

No, mileage reimbursement up to the IRS standard mileage rate is non-taxable. Amounts exceeding this rate must be reported as taxable income​ [2], unless they’re issued under a FAVR plan.

Can tolls and parking fees be reimbursed?

Yes, tolls and parking fees incurred during business travel are reimbursable and should be included in expense reports​ [2]

How should self-employed/independent contractors track their mileage?

Self-employed and/or independent contractors should maintain a detailed mileage log, including dates, purposes of trips, and miles driven, to support their tax deductions.

What happens if the reimbursement rate exceeds the IRS standard mileage rate?

Any reimbursement exceeding the IRS standard mileage rate must be reported as taxable income, unless you use a FAVR program.

By following these guidelines and keeping accurate records, Washington state employers and employees can effectively manage mileage reimbursement and ensure compliance with IRS regulations.

Conclusion

Understanding mileage reimbursement laws in Washington State is necessary for both employees and employers. By following one of the IRS-approved methods for reimbursement, like FAVR, 463, or IRS standard rate, both parties can ensure fair compensation for business travel and maximize tax benefits. For personalized advice, consider consulting with a tax professional or HR expert.

Alternatively, if you’re looking for a better way to manage reimbursements or payroll than submitting receipts and time sheets to your employer or the IRS, consider connecting with Cardata to discuss more efficient vehicle reimbursement solutions.

Sources

[1] https://www.irs.gov/newsroom/irs-issues-standard-mileage-rates-for-2024-mileage-rate-increases-to-67-cents-a-mile-up-1-point-5-cents-from-2023

[2] Automatic mileage tracker | MileIQ

[3] IRS

[4] https://www.dol.gov/agencies/whd/flsa

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