IRS Standard Rate

The IRS standard rate is a tax-free mileage reimbursement rate set by the IRS. The IRS typically updates this rate once per year based on changes in the average cost of driving. As of January 2023, the standard rate is 65.5 cents per business mile. 

Mileage reimbursements at or below the IRS standard rate are always tax-free, as long as mileage is substantiated. This makes the standard rate a popular choice for cents per mile (CPM) reimbursement programs 

The standard rate is also used to apply the taxable income test for drivers on an accountable allowance, or FAVR drivers that are out of compliance with one of FAVR’s tax rules. 

The taxable income test compares what a driver was paid in fixed and variable reimbursement to what they would have received had they been paid at the IRS standard rate. This is called their non-taxable limit. If their reimbursement is lower than their non-taxable limit, their entire reimbursement is tax-free. If their reimbursement is higher than their non-taxable limit, the difference between the two is considered taxable income. 
Read more about tracking business mileage, including what trip information needs to be logged and the different methods of recordkeeping. If you’re thinking about outsourcing your mileage program, consider speaking with a Cardata expert to learn how they can automate mileage tracking and support you with built-in compliance logic.