Modern Vehicle Reimbursement Programs for Construction Firms

When Miles Become Money: The True Cost of Construction Travel

Did you know the average construction worker drives more than 1,100 business miles each month? That’s not just time on the road. It’s a serious expense line item for construction companies, and how you choose to reimburse those miles makes all the difference.

The Hidden Price Tag of Driving

Unlike desk jobs, construction roles are spread out across multiple sites. A project manager may start the day at a supplier, then check in on 2 or 3 projects, and end their evening at a safety meeting across town. The trips accumulated in a single day can add up quickly.

The average 1,100 monthly miles driven by construction employees translates to over $9,200 in annual reimbursements per driver if paid at the typical IRS standard mileage rate ($0.70 in 2025). For a team of 50 drivers, you’re suddenly looking at more than $462,000 each year in mileage expenses.

Fairer, Smarter Mileage Programs for Construction Teams

Not every employee has the same driving needs, and that’s where programs like Fixed & Variable Rate (FAVR) and Tax-Free Car Allowance (TFCA) come in. CPM, or simply paying at the IRS standard per-mile rate, is best suited for low-mileage occasional drivers.

With FAVR, instead of paying a flat per-mile rate that ignores ever-changing real-world costs, this approach breaks reimbursement into two parts: a fixed monthly payment that covers predictable ownership expenses like insurance, depreciation, and registration, and a variable rate applied per mile that accounts for costs like fuel prices and maintenance. FAVR keeps reimbursements aligned with reality. 

Some forward-thinking construction firms are already seeing results. By adopting modern reimbursement platforms like Cardata, they’re ensuring fair payments, cost optimization, and less admin headaches for all employees involved. 

For example, an employee who drives 2,000 miles a year is an occasional driver. They’re not in their car that often, so a simple CPM program works well. It’s easy to manage, tax-free, and gives them a fair return for the amount they drive. In this case, they’d be reimbursed around $1,400 per year at the IRS rate of $0.70, which is reasonable for occasional business travel.

On the other hand, an employee who drives 18,000 miles per year is clearly a high-mileage driver. They’re on the road all the time, and their costs reach beyond just gas. If these high-mileage drivers were reimbursed using the basic CPM rate, they would receive $12,600 annually, but that flat rate doesn’t always reflect their real costs – it can over or undercompensate. It also doesn’t adjust for where they live, or the kind of car they’re expected to drive. That’s where FAVR comes in. It calculates both the fixed and variable costs based on real data such as; location, mileage, and vehicle type. It is a smarter, fairer way to reimburse active drivers.

This is why total spend matters, depending on how much someone drives. For occasional drivers, CPM keeps complexity and admin work low. For high-mileage drivers, FAVR ensures drivers are paid fairly and your company remains compliant. Using the right program for the right driver protects both the business and employees.

While FAVR works well for many high-mileage drivers, some construction teams need something simpler. That is where the Tax-Free Car Allowance (TFCA), referencing IRS Publication 463, comes in. The rule is straightforward: drivers log their business miles, and Cardata runs the Tax Test. This is a quick comparison of reimbursement vs mileage multiplied by the IRS rate. If a driver is paid more than the IRS threshold, only the extra is taxed. If the amount is equal to or less than, it’s fully tax-free. This makes TFCA flexible while still keeping payments compliant

When it comes to compliance, each program has its own requirements. CPM is the simplest. As long as the mileage rate stays at or below the IRS standard ($0.70 in 2025), and drivers record their mileage, reimbursements remain tax-free. Meanwhile, FAVR is more complex. Drivers must log at least 5,000 business miles per year, companies must set up and update their vehicle profile annually, reimbursements for fixed costs are capped at 75% of ownership expenses, and detailed mileage records must be kept to prove IRS compliance. TFCA also has different compliance requirements. Drivers still log their mileage, but instead of strict mileage minimums, the Tax Test ensures compliance by taxing only the portion above IRS limits. This allows TFCA to remain flexible while keeping companies compliant with IRS guidelines.

This makes TFCA a great fit when you are not sure all drivers can meet FAVR’s stricter compliance requirements. It reduces administrative burden, keeps reimbursements competitive, and gives your company predictable costs. 

Many construction firms also drop fuel cards when they move to an accountable reimbursement model. That way, everything sits in one clean, compliant, and verified program. In the end, tax-free mileage programs are about balance. Ensuring employee drivers are treated fairly and helping your company avoid overspending (https://cardata.co/blog/how-does-car-allowance-work/).

Technology That Removes Friction

Modern mileage tools quietly do the hard work in the background. Trips are captured automatically, business miles are separated from personal, and IRS-ready logs are created without the need for manual spreadsheets. Managers can also receive custom alerts when something is missing, while finance gains access to clean cost data to tune fixed and variable rates by region, and HR has a single source of truth for policy compliance. The result is accurate reimbursements, simplified oversight, and an overall streamlined vehicle program.

Blueprint to a Better Mileage Program

Start by mapping where your employees drive each month and compare those miles to the IRS standard rate. If the data shows consistent over or underpayment, segment your drivers by role and mileage pattern. High-mileage core roles tend to fit FAVR because the fixed and variable split mirrors true costs in each region. If you are unsure, some groups will meet FAVR compliance, use TFCA and let the Tax Test keep payments fair and tax smart. Decide how you will handle fuel. Many construction firms retire fuel cards, so all reimbursement sits in one place. 

Implementing your reimbursement program with a partner like Cardata makes this process easy. 

We will use your people’s mileage habits and locations to compare reimbursement models and see if there is room for optimization, while showing you where savings are likely. 

If you want to see what this looks like for your construction organization, connect with Cardata for a demo today.

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 nor 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.