In 2018, Illinois joined other states that legally require employers to reimburse employees for using a personal vehicle for work. Here is the best way to reimburse these employees and comply with the Illinois Wage Payment and Collection Act.
Quick Answer: How Should Illinois Employers Reimburse Personal Vehicle Use?
Illinois employers should reimburse employees for necessary vehicle expenses incurred within the scope of employment and directly related to services performed for the employer. For employees who use a personal vehicle for work, that may include the business-use portion of fuel, insurance, maintenance, depreciation, registration, taxes, license fees, parking, tolls, and other required travel expenses.
Illinois does not set one required private-employer mileage reimbursement rate. Many employers use the IRS business mileage rate as a benchmark, but they may also use a company-set rate, actual expense reimbursement, a car allowance with substantiation, or FAVR, as long as the method reasonably reimburses necessary business expenses and complies with the company’s written policy.
Which personal vehicle expenses must be reimbursed in Illinois?
Illinois Mileage Reimbursement Law
Illinois employers should reimburse employees for necessary business expenses incurred in the course of employment and directly related to services performed for the employer. When employees use a personal vehicle for required business travel, those expenses may include the business-use portion of both vehicle ownership and operating costs.
Vehicle ownership costs may include insurance, depreciation, taxes, license fees, and registration. Vehicle operating costs may include fuel, oil, tires, maintenance, parking, tolls, and other necessary travel expenses.
Illinois law does not require every private employer to use one specific mileage rate. Instead, employers should use a reasonable reimbursement method, define the policy in writing, require appropriate supporting documentation, and avoid policies that provide no reimbursement or only de minimis reimbursement.
A written policy should explain which trips are reimbursable, what rate or method applies, what documentation employees must submit, and how quickly expenses must be submitted for reimbursement.
Mileage reimbursement in Illinois
What Is the Illinois Mileage Reimbursement Rate for 2026?
Illinois does not set a specific mileage reimbursement rate for private employers. Many employers use the IRS business mileage rate because it is familiar, easy to calculate, and commonly used for business mileage reimbursement.
For 2026, the IRS business mileage rate is:
- 72.5 cents per mile for business miles driven January 1 through June 30, 2026
- 76 cents per mile for business miles driven July 1 through December 31, 2026
The IRS rate is a national benchmark, not an Illinois-specific requirement. Employers should still review whether the reimbursement method covers necessary business vehicle expenses and aligns with the company’s written reimbursement policy.
Travel reimbursement rates in Illinois
Aside from mileage reimbursement at the federal IRS rate, there are other options to comply with the IWPCA.
- Mileage reimbursement at a different rate
- Fixed and variable rate reimbursement (FAVR)
- Car allowance or mileage allowance
- Actual expense method
What Is the Best Way to Reimburse Illinois Employees for Mileage?
The best reimbursement method depends on the workforce, mileage patterns, documentation process, employee locations, and administrative resources. Illinois employers should choose a method that is reasonable, documented, and aligned with the company’s written reimbursement policy.
A strong Illinois vehicle reimbursement program should include:
- A written reimbursement policy
- Clear rules for reimbursable business travel
- A defined mileage rate or reimbursement method
- Supporting documentation requirements
- Timely submission and approval workflows
- A process for reimbursing tolls, parking, or other required travel expenses
- Regular review of vehicle costs, mileage patterns, and employee locations
The “best” method is not always the simplest method. A flat allowance may be easy to administer, but it may create tax waste or reimbursement gaps. The IRS mileage rate may be familiar, but it is one national benchmark. FAVR may be more accurate for mobile teams with different mileage levels or territories, but it requires more structure.
Quantifiable reimbursement
A defensible reimbursement under the Illinois WPCA should have a methodology for deriving payments. These payments should be quantifiable and based on vehicle expense data. The most common forms of payments to employees for the business use of a vehicle do not meet this criterion.
- Mileage reimbursements: often use the IRS mileage rate, which is based on average annual expenses nationwide.
- Car allowances: typically not based on localized expense data and compromised by taxation of payments.
- Actual expenses: quantifiable but time-consuming to manage because it requires tracking and expensing receipts.
- Fixed and variable rate: quantifiable because rates derive from localized vehicle expense data and are individualized for drivers.
Automated expense reporting
Automated expense reporting is important to keep employees focused on their jobs rather than on administrative tasks. Any expensing system that relies on manual reporting of individualized expenses will be time-consuming and frustrating for drivers and managers.
Many mileage reimbursement programs involve some amount of manual reporting of trips and mileage. Not only can this lead to overestimates at the organization's expense, but it can also lead to frustration among everyone involved in the mileage reporting and approval process.
Using a compliant mileage log
To properly track mileage for reimbursements in Illinois, you need to log the following information:
- Date and time of each trip
- Trip destination and purpose
- Total mileage of the trip
Best practice is to integrate a GPS-based mileage app into your organization's expensing system. A mileage-tracking app will automatically calculate mileage and reimbursements on mobile devices. This works whether you use a standard mileage rate or a FAVR reimbursement rate.
Is FAVR a Good Option for Illinois Vehicle Reimbursement?
FAVR, or Fixed and Variable Rate reimbursement, may be a good fit for Illinois employers with frequent drivers, multiple territories, or employees with different mileage patterns.
FAVR separates fixed vehicle costs, such as insurance, depreciation, registration, taxes, and license fees, from variable operating costs, such as fuel, oil, tires, and maintenance. This can create a more cost-specific reimbursement method than one flat allowance or one national mileage rate.
FAVR can also support tax-free reimbursement when IRS requirements are met, and business mileage is properly documented. However, it requires a policy structure, mileage tracking, vehicle cost assumptions, and ongoing administration.
What are the consequences of violating Illinois labor law?
If an employer is found to have violated the Illinois WPCA, then the employer will be responsible for repaying more than just the full amount of underpayment to the employee. The employer must also pay additional damages equal to 5% of the underpayment for each month during which the full reimbursement has not yet been paid.
The employer must also pay an additional fee to the Illinois Department of Labor, ranging from $250 to $1,000, depending on the size of the underpayment. It is also important to note that any officers of the corporation who knowingly allowed the underpayment may be found personally liable for the money owed to the employee.
How to protect your organization from Illinois labor violations
To protect your organization from labor code violations in Illinois, choose a vehicle reimbursement method that is quantifiable, data-driven, automated, and cost-effective. We recommend fixed- and variable-rate reimbursement because it is the only plan that combines all of these qualities.
FAQs About Illinois Mileage Reimbursement
Does Illinois require mileage reimbursement?
Illinois requires employers to reimburse necessary expenditures or losses incurred within the employee’s scope of employment and directly related to services performed for the employer. If employees are required to use a personal vehicle for work, business vehicle expenses may need to be reimbursed.
What is the Illinois mileage reimbursement rate for 2026?
Illinois does not set a specific mileage reimbursement rate for private employers. Many employers use the IRS business mileage rate as a benchmark: 72.5 cents per mile for business miles driven January 1 through June 30, 2026, and 76 cents per mile for business miles driven July 1 through December 31, 2026.
Can Illinois employers use a rate lower than the IRS mileage rate?
Illinois employers may use a different reimbursement method, but the method should reasonably reimburse necessary business expenses, follow the company’s written reimbursement policy, and avoid no reimbursement or de minimis reimbursement.
What vehicle expenses should Illinois employers consider?
Employers should consider fuel, insurance, maintenance, depreciation, registration, taxes, license fees, oil, tires, parking, tolls, and other necessary business travel expenses.
Do Illinois employees need to submit documentation?
Yes. Illinois law references appropriate supporting documentation and a 30-day submission window unless the employer’s written policy provides additional time.
Is FAVR a good option for mileage reimbursement in Illinois?
FAVR may be a good option for Illinois employers with frequent drivers, different territories, or different mileage levels. It separates fixed and variable vehicle costs and can support tax-free reimbursement when IRS requirements are met and business mileage is properly documented.
Not sure whether your Illinois vehicle reimbursement method is fair, documented, and cost-effective? mBurse can help you compare the IRS mileage rate, company-set mileage rates, actual expense reimbursement, car allowances, and FAVR to identify where your program may be creating reimbursement gaps or unnecessary tax waste.
