New York Mileage Reimbursement: Rates and Rules

Mileage Reimbursement

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Introduction

New York has been the economic hub of the nation since its founding (and even before that, as it was the seat of the Iroquois and Algonquin nations prior to Dutch settlement in 1614.) With the Erie Canal connecting the Atlantic Ocean to the Great Lakes, New York State quickly became the lodestar guiding the settlement and founding of America, as well as home to its main industrial, economic, and population centers.[1]

New York was the home of the nation’s first steamboat, its first rail service[2], and today still serves as an locus for the vast network of flight routes, automobiles, and highways that connect the cities of the Eastern Seaboard.

That means that millions of miles are driven per annum by salespeople, freight workers, logistical professionals, and distributors to serve the economic needs of the Empire State. And that’s probably why you’re reading this article today—to figure out how to adequately compensate your employees and drivers for the time they spend on the road on your behalf.

New York has no statal mileage reimbursement requirements

The first and most important piece of information you need to know about New York and its statal requirements for mileage reimbursement is that the Empire State hasn’t set any. That’s right: New York State doesn’t have a mileage reimbursement rate set for the state.

Furthermore, there are no labor or tax laws that specifically mandate employers to compensate employees for miles driven in their personal vehicles for work.

However, while the letter of the law suggests you have carte blanche to compensate your employees as little as you please, that isn’t a realistic option for employers in 2023. While there are no specific legal requirements dictating that you must offer a vehicle allowance or mileage reimbursement rate to your sales teams and distributors, it will be difficult to hire competent and reliable salespeople and distribution agents without one.

Your employees work hard to represent your company, and they shouldn’t have to pay out-of-pocket for the gas they use and depreciation expenses their personally-owned vehicles accrue while on the job—and many won’t, if your competitors offer a better arrangement.

So even though there isn’t any law on the books compelling you to set a mileage reimbursement rate for your drivers, there are standards to meet and to expect, and this is one of them. More on that below.

New York State and the Internal Revenue Service’s Cents per Mile rate

Like with other states in this series of blog posts, absent a more complex reward structure such as a FAVR program, you are free to offer your workers that drive in New York State a Cents per Mile rate at or below the federal mileage reimbursement rate set by the Internal Revenue Service.

(That rate, for 2023, was 65.5 cents per mile[3], and we’ll see whether or not the IRS raises, maintains, or lowers the 2024 rate at their annual announcement in December of 2023.)

Here’s why you might choose to stick close to the IRS federal rate:

It’s good enough for State employees and agencies. Here’s a document[4] from the office of the New York State Comptroller that explains that “New York State reimburses employees for business use of a personal vehicle based on the standard mileage allowance established by the Internal Revenue Service (IRS) and the U.S. General Services Administration (GSA).” So, if you want to be competitive with public reimbursements, it could be a good idea to match.
Adhering to the Cents per Mile rate guarantees your payments are exempt from federal, state, and payroll taxes. This equals less of a tax burden on your company and your employees, which is something everyone is grateful for at the end of a fiscal reporting period. This is a difference from taxed allowances. N.B., These payments are tax-free so long as they do not exceed the IRS cents per mile rate. Any cent per mile above the IRS rate will be taxed as though it were income.
The reporting and logging of miles and expenses is relatively straightforward. Offering your employees the option of reimbursement of actual expenses is always available, but it requires a great deal of paperwork. The IRS offers the Cents per Mile rate as a fair compromise between the need to document and justify all work expenses and a relatively relaxed version of that need—the need only to log odometer readings, the business purpose of the trip, and the exact route driven.

Buyer beware! There are times when the IRS Cents per Mile rate is not ideal for your workforce. Check out this video to see when that is:

New York average reimbursement

Cardata estimates that the average car allowance for New York State is higher than the $600 national average. New York State is far away from the fuel-producing Gulf states, imports more food than it grows, and has a higher cost of living due to the economic activity in the state.

Because the Empire State is the third most economically productive state[6] according to GDP per capita, this naturally results in higher fluctuations in local pricing, as demand will always stay closely aligned to supply in such a market.

This of course will change according to several variables, those related to your specific business operations. But you can estimate that the payment will be above the national average without much room for doubt.

How to keep records of business travel expenses for New York state tax compliance

Since New York has no specific requirements on the books for employers, we can defer to the federal guidelines for adequate record-keeping to ensure compliance and avoid headaches in the case of an audit or inspection.

Those requirements are:[7]

Timely-kept records. It doesn’t matter whether you use a mileage-tracking app or a paper log, but all evidence of business travel must be logged within 30 days except in very special circumstances.

Explanation of business purposes of trips. You cannot claim miles driven to and from your place of work, as those are considered commuting expenses. You must record in your log the purpose of each trip and how it related to your employment duties.

Regular reporting of records to a supervisor. Records for all drivers must be turned in to a supervisor each month for review and reported to the IRS during the annual reporting period.

Documentary evidence. All claims and deductions made must be supported by documentary evidence, which includes geolocation data, miles recorded by an app’s odometer, receipts for purchases, and other supporting documentation. While you don’t need all of this material, you do need some of it to prove your deduction claims. This becomes very helpful in the case of an audit.

(These rules are those of publication 463 and pertain directly to Accountable Allowances—however, they are good general accounting practices as well. There are more rules for FAVR programs that you should learn about before implementing a Fixed and Variable Rate program.)

Conclusion

In conclusion, you are free to offer your employees living or driving in New York State any vehicle reimbursement rate; one that matches the maximum cents per mile rate set by the IRS or a FAVR or Accountable Allowance program; and as long as you keep the proper records, as noted above, this payment will be considered tax-free on both a state and federal level.

The right reimbursement program goes a long way to attracting top sales talent and reliable drivers to get your product to market. It also saves you from the insurance and legal liability that you would be exposed to with a fleet of company cars, as well as managing the depreciation costs and maintenance of individual vehicles. All in all, it’s a pretty good deal.

If you’d like to discuss your options or see how you can optimize your tax liability, speak to an expert here.

^{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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