A 2024 guide to mileage reimbursements by state

This guide will explain the concept of mileage reimbursement, and outline the 2023 state mileage rates for each of the 50 states. If you want to understand the law surrounding mileage reimbursements, and why ensuring your company complies with the correct laws is important - read on.

What is the mileage reimbursement?

Mileage reimbursement is a way for employers to reimburse mileage or travel expenses to their employees when the employees travel for business related purposes.

After the Tax Cuts and Jobs Act, employees are usually not able to deduct their travel expenses directly, so they must rely on their employers to reimburse them for expenses incurred while traveling for a business purpose. The state mileage rate for 2023 varies by each state, so it is important to ensure your businesses uses the appropriate rate.

Is mileage reimbursement required by law?

As of 2023, the following three states have introduced mandatory mileage reimbursement rules:

• California
• Massachusetts
• Illinois

California mileage reimbursement rate

California’s state law requires that employees be reimbursed for “mileage expenses that are within the scope of their employment.” This includes miles traveled on behalf of the company for outside business trips and miles traveled during normal business hours while away from the company. It is important to note that mileage expenses incurred outside normal business operations do not qualify for reimbursement.

The CA mileage rate 2023 is 65.5 cents per mile. However, this is not mandatory. Businesses can choose to reimburse at more or less than the IRS rate. If a business chooses to provide less than the IRS rate for its reimbursement, the company must be careful to not provide a rate so low as to reduce the employee’s wage rate below the federal minimum wage threshold.

For example, Domino’s pizza had a lawsuit filed against the company for providing a flat $1 reimbursement for each delivery completed. Drivers claimed that when they totaled the amount of miles traveled, the $1 reimbursement was much less than what the IRS rate would have provided and reduced their average hourly wages below the minimum wage threshold, in violation of federal labor laws.

Massachusetts mileage reimbursement rate

Massachusetts is the next state that requires mileage reimbursement to employees by law. The law states that “any travel after the beginning of and before regular business hours while employed in an occupation requires reimbursement of travel costs to and from the destination.” This means that businesses must reimburse employees for their business travel expenses, and state courts have found the mileage rate for 2023 in Massachusetts should be 65.5 cents per mile.

Like California, the actual reimbursement rate is not enforceable legally, but practically speaking Massachusetts businesses use the IRS standard rate for simplicity and to ensure they are compliant with both state reimbursement law and federal labor laws.

Illinois mileage reimbursement rate

Illinois has a similar mileage reimbursement law to California, stating that “employees shall be reimbursed for expenses incurred while traveling during the scope of employment.” The Illinois mileage rate for 2023 is 65.5 cents per mile, as many businesses find using the IRS set rate to be most practical.

An important point about the Illinois law is that for employees to receive the reimbursement, they must provide written documentation of the mileage traveled or expenses incurred within 30 days. If they do not, they must submit a signed statement why they do not have the proof. Otherwise, employers are not required by law to reimburse their employees for miles traveled during work.

New York mileage reimbursement rate

Unlike the states listed above, New York does not have a specific state law that requires private employers to reimburse employees for mileage expenses. However, the state government of New York, as a public employer, does reimburse its employees for mileage expenses. Like the states discussed above, the mileage rate for 2023 in New York is 65.5 cents per mile.

Michigan mileage reimbursement rate

Michigan has a unique approach to mileage reimbursement rates and uses a multi-rate approach. The Michigan mileage rate for 2023 for government agencies follows the IRS standard rate of 65.5 cents per mile, but the court system uses a reduced mileage rate of 44 cents per mile for mid-sized vehicles, and the IRS standard mileage rate of 65.5 cents per mile for premium vehicles.

If the employer is a charitable organization, the rate is reduced to 14 cents per mile. It is important to note that private employers are not bound to follow these rates but can use them as guidelines when setting their own mileage reimbursement rate policies.

Ohio mileage reimbursement rate

Ohio’s mileage reimbursement laws are like New York’s in that there is no specific rate that businesses are required to reimburse employees, but it is widely accepted that the IRS standard rate is the proper rate to use. Therefore, the mileage rate for 2023 in Ohio is 65.5 cents per mile.

Additionally, public employers such as the state university and government systems explicitly state that the proper reimbursement rate is the rate set by the IRS.

The state of Florida mileage reimbursement rate 2023

The state of Florida mileage reimbursement rate takes a similar approach to Massachusetts. Most businesses reimburse at the IRS rate, but some choose to provide a higher reimbursement rate as an incentive to improve customer performance. In these situations, it is important to consider the tax implications to both employer and employee, as excessive reimbursement is subject to income and payroll taxes.

Connecticut (CT) mileage tax and Wisconsin mileage rate 2023

Connecticut and Wisconsin are two states that are typical of most states in the U.S. when it comes to mileage reimbursements. Neither state requires reimbursement by law, but almost all businesses do reimburse their employees for miles traveled.

The CT Mileage rate for 2023 is 65.5 cents per mile, and the mileage rate for 2023 in Wisconsin is also 65.5 cents per mile.

Colorado mileage reimbursement

Colorado mileage reimbursement has a similar approach to Michigan in that the state uses the IRS mileage reimbursement rate as a starting point and multiplies the rate by 90% to calculate the state’s reimbursement rate. For example, for 2023 the IRS rate is 65.5 cents per mile, so the Colorado mileage reimbursement is set at 90% of this rate, or 59 cents per mile.

In certain situations, heavier vehicles with all wheel drive may qualify for up to 62 cents per mile if they meet certain criteria. This is due to Colorado’s landscape and the need to occasionally use heavy duty vehicles for business.

Texas mileage reimbursements

The Texas mileage reimbursement law mirrors states like Michigan and Colorado. For state employees, the Texas mileage reimbursement law requires reimbursement at 65.5 cents per mile. Private businesses are not forced by law to reimburse at 65.5 cents per mile, but most do for practical purposes.

Mileage reimbursement by state

*But employers must compensate for time if they don't pay per mile
**If it is a direct result of their duties

Over-reimbursing employees and tax implications

Tax considerations are extremely important when setting your company’s mileage reimbursement policy. Reimbursed mileage expenses are ordinarily not taxed, as these qualify as business expenses incurred by the employee that are later reimbursed by the employer.

However, if the employer over reimburses the employee for miles traveled, the excess reimbursement will be taxed as regular compensation. This is because the employee is receiving more than they spent on travel, so the IRS considers the excess reimbursement as extra income.

Managing mileage with Payhawk

At Payhawk, we provide an all-in-one solution for tracking mileage, per diems, and out-of-pocket reimbursements. With us by your side, managing your business trip expenses is hassle-free, meaning you can focus on packing your bags, taking that journey, and growing your business with confidence.

We put you in the driving seat by offering some big time-saving benefits, including:

• Easy trip reimbursement in a matter of clicks
• The ability to set the rate per mile/km as per your own business policy
• Easy journey tracking
• Automatic cost calculations

Make mileage more manageable at your business, book a demo to find out more.