What is the Average Mileage Reimbursement in the US?

Mileage reimbursement policies play a critical role in supporting employees who use their personal vehicles for business purposes. These programs are shaped by a combination of IRS guidelines, company policy, and state legislation. While there is no single mandated figure across all contexts, we can examine various benchmarks and reimbursement methods to understand the broader landscape of vehicle cost compensation in the United States.

IRS Standard as the Federal Benchmark

The Internal Revenue Service (IRS) provides an annually updated guideline for business mileage reimbursement. For 2025 this rate is 70 cents per mile. This rate is designed to cover typical vehicle expenses including fuel, insurance, depreciation, and maintenance. The IRS updates this figure to reflect economic shifts such as inflation, fuel prices, and vehicle ownership costs.

Organizations using this standard ensure tax-free reimbursements under accountable plans. These reimbursements are not reported as taxable income, provided employees document their business mileage properly and return any excess reimbursements.

State-Level Reimbursement Practices

While the IRS standard serves as a baseline, actual mileage reimbursement practices vary significantly at the state level. In Illinois, for example, mileage reimbursement is mandatory under state law, and the average annual reimbursement slightly exceeds the national average of $600 due to urban density and extensive travel networks.

New York does not impose a mileage reimbursement requirement, but employers generally follow the IRS guideline to maintain tax compliance. The state’s higher cost of living often results in reimbursement rates above the national mean.

Meanwhile, states like Texas and Florida do not legally mandate reimbursement. Still, companies often voluntarily follow IRS recommendations, especially in sectors where vehicle use is integral to operations. In Texas, regional averages vary, with some businesses reimbursing as low as $560 per month, while in Florida, rates tend to fall below the national average, likely due to lower cost-of-living metrics.

Vehicle Reimbursement Programs (VRPs)

Organizations may choose alternative structures like Vehicle Reimbursement Programs (VRPs), which include both the Cents per Mile (CPM) method and Fixed and Variable Rate (FAVR) plans. These models allow greater flexibility and customization.

CPM programs follow the IRS rate, offering a straightforward, per-mile payout. However, this method tends to benefit high-mileage drivers disproportionately while potentially under-compensating those who drive less.

FAVR programs, by contrast, combine a fixed monthly amount (covering insurance and depreciation) with a variable component tied to actual mileage. This model results in more equitable reimbursements based on geographic and usage-based factors. Importantly, FAVR programs can legally exceed the IRS mileage rate without incurring taxes, provided they meet IRS compliance requirements.

Average Reimbursement Figures Across Industries

Though hard to pin down a definitive national figure, reimbursement data from industries can offer valuable insights. In Ohio, for example, reimbursement rates average approximately $630 monthly—well above the $600 national baseline. Higher compensation is common in industries like construction, sales, logistics, and field service, which require frequent driving.

The construction industry, in particular, often reports rates around $0.28 to $0.29 per mile due to the rugged use of vehicles and specialized driving demands.

In contrast, New Jersey reimburses state employees at just $0.31 per mile, while private sector employers may choose to use the IRS rate. These variations illustrate how reimbursement amounts can differ not just by geography, but also by the public or private nature of employment.

Impact of Inflation and Vehicle Costs

Recent economic shifts have increased the cost of vehicle ownership, influencing how companies structure reimbursements. Average new car prices rose by over 22% in 2022, and inflation has driven up fuel, maintenance, and insurance expenses. These rising costs strain traditional flat-rate or CPM programs and make variable, dynamic reimbursement systems more appealing.

For businesses, failing to adjust reimbursement rates to reflect these economic realities can result in under-compensation for employees or increased taxable liabilities if excess reimbursements are not returned or taxed appropriately.

Hybrid Approaches and Technological Enhancements

Some employers opt for hybrid reimbursement models—using FAVR for high-mileage roles and CPM for infrequent drivers. This method allows equitable distribution of costs and better alignment with actual vehicle use.

Technology further streamlines reimbursement processes. Mobile apps and GPS systems automate mileage tracking, saving employees up to 42 hours annually on administrative tasks. These tools also enhance accuracy, improve compliance, and reduce fraudulent claims.

Compliance Considerations

Adhering to IRS guidelines is essential for avoiding tax penalties. Accountable plans must include substantiated mileage records and require employees to return any excess funds within a specified period—usually 30 days.

Employers must also consider state-specific requirements. For example, California, Massachusetts, and Illinois legally mandate employee mileage reimbursement, necessitating compliant programs in those states.

Summary

In the United States, the benchmark figure for mileage reimbursement is shaped largely by the IRS. However, actual practices vary by employer, industry, and state. While CPM remains common, FAVR offers a tax-efficient and more equitable solution tailored to usage patterns. Hybrid models and automated mileage tracking are emerging as best practices to ensure fairness and compliance while controlling operational costs.

Understanding and implementing a thoughtful mileage reimbursement strategy is more than a matter of cents—it is a critical component of employee compensation, regulatory compliance, and financial planning.

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.