What is the average mileage charge for business?

Understanding how businesses handle vehicle expenses through mileage reimbursements is essential for both employers and employees navigating the economic and regulatory environment of work-related travel. The average mileage charge for business hinges on several factors including reimbursement method, geography, industry, and compliance with IRS regulations. This article explores the different reimbursement models, what typical rates look like across various contexts, and how businesses optimize these charges.

Mileage Reimbursement Frameworks

Most organizations that reimburse for mileage do so through either a standard per-mile rate or a more comprehensive vehicle reimbursement program (VRP). The standard mileage rate is updated annually by the IRS and serves as a benchmark. For 2024, the IRS rate was 67 cents per mile, and rose to 70 cents per mile in 2025 .

However, this one-size-fits-all rate doesn’t reflect the varying costs incurred by different drivers or industries. As a result, many companies opt for more nuanced systems such as Fixed and Variable Rate (FAVR) programs. These programs combine a monthly fixed payment for ownership costs (like depreciation and insurance) with a variable per-mile rate for operating expenses (like gas and maintenance).

Comparing Reimbursement Averages

The average amount employees receive through mileage reimbursement varies, but a national benchmark is around $600 monthly. States like Ohio and Pennsylvania report slightly higher figures, at approximately $630 and above $600 respectively, due to more extensive highway systems and higher regional vehicle usage.

In contrast, regions with lower living and transportation costs, such as Texas and parts of the southern U.S., show averages closer to $560 per month. This variability illustrates the importance of aligning reimbursement models with localized expenses.

Reimbursement by Method: CPM vs. FAVR

The Cents Per Mile (CPM) model is simple but can create disparities. High-mileage drivers might be overcompensated, while those who drive less may receive less than their actual expenses. Meanwhile, FAVR programs, which are IRS-compliant and tax-free, tailor reimbursements to actual driving patterns and local cost conditions. These can save businesses up to 30% annually compared to traditional car allowances or CPM systems.

Business Use and Industry-Specific Trends

Reimbursement rates often reflect industry needs. Construction and field service roles, which involve higher mileage, typically have lower per-mile averages—around $0.28 to $0.29—to account for frequent usage over long distances. These industries often prefer hybrid models, combining FAVR for regular drivers and CPM for occasional users, to balance cost and fairness.

Sales, logistics, and healthcare sectors may also maintain higher allowances due to the necessity of frequent and timely travel. In these industries, precision in mileage tracking and reimbursement is critical not only for cost control but also for regulatory compliance.

Factors Influencing Mileage Charges

Several components influence what businesses end up charging or reimbursing for mileage. These include:

• Fuel Costs: Fluctuations in gas prices directly affect per-mile variable rates, particularly in FAVR models.
• Vehicle Type and Condition: Newer vehicles with better fuel efficiency may incur lower operating costs.
• Geographical Considerations: Urban environments with frequent stop-and-go traffic may increase maintenance costs, while rural areas often see higher mileage totals.
• Insurance and Licensing: Business use endorsements and commercial insurance add to ownership costs, which are factored into fixed reimbursements in FAVR plans.

Technology and Administrative Savings

The adoption of automated mileage tracking solutions has streamlined expense reporting, reducing inaccuracies and administrative burdens. Employees using tracking apps can save up to 42 hours annually on mileage logging. Companies deploying integrated systems report a 55% reduction in fuel expenses due to better tracking and route optimization.

Real-time reimbursement dashboards and automated accounting further reduce HR overhead, improving transparency and employee satisfaction.

Compliance and Tax Efficiency

IRS-compliant programs like FAVR offer considerable tax advantages. Businesses reimbursing above the IRS standard rate through non-compliant means must treat the excess as taxable income, increasing the overall cost of compensation. In contrast, reimbursements that fall within IRS guidelines are tax-exempt, preserving both employer budgets and employee earnings.

States like California, Illinois, and Massachusetts legally require mileage reimbursement for business use, adding a layer of regulatory urgency to proper program design. Employers in these regions must ensure that reimbursements cover all reasonable expenses to avoid penalties and legal challenges.

Strategic and Financial Outcomes

Switching from fleet vehicles or taxable allowances to structured reimbursement programs such as FAVR can yield significant cost savings. A multinational company reportedly saved $382,000 annually after transitioning to Cardata’s FAVR program, citing lower liability, improved policy compliance, and reduced administrative burden.

Additionally, reimbursing based on actual use discourages unnecessary driving, leading to sustainability benefits. VRPs can align with corporate environmental goals by encouraging electric vehicle adoption and reducing emissions.

Conclusion

Mileage charges for business use are far from uniform. The average figure depends on the reimbursement strategy employed, geographical context, and industry demands. While the IRS rate serves as a useful baseline, organizations can realize significant cost and compliance benefits by adopting tailored solutions like FAVR. By aligning reimbursement with actual expenses and leveraging technology for accuracy, businesses ensure fair, efficient, and tax-advantaged mileage compensation for their mobile workforce.

Disclaimer:

The content provided in this blog is for informational purposes only and is not intended as legal, financial, or tax advice. While every effort has been made to ensure the accuracy and reliability of the information at the time of writing, Cardata and the author assume no responsibility for any errors or omissions. Readers should consult with a qualified professional to determine how any information discussed may apply to their specific circumstances.