Businesses and employees operating in New York should know the laws that govern mileage reimbursements. The state of New York does not require mileage reimbursement, but competition may demand it.

Mileage reimbursement in New York

New York does not explicitly require employers to reimburse employees using a personal vehicle. However, there are some relevant laws that can affect when and how employers compensate workers for vehicle costs.

Section 652: New York minimum wage law

The state of New York has robust minimum wage requirements. In New York City and in counties that surround the city, the minimum wage for 2024 is $16.00/hour. The wage is $15.00/hour in many other parts of the state.

These amounts are scheduled to rise in the coming years. After reaching $17.00/hour in 2026, the rate will begin increasing in relation to the Consumer Price Index. The CPI is an index that measures inflation.

Total compensation cannot dip below these amounts. Therefore, employers must ensure that work-related vehicle costs do not eat into compensation. A mileage reimbursement or car allowance can help avoid this form of wage theft.

New York Labor Law Section 198-C

Section 198-C governs reimbursement of employees. This law stipulates that employers must fulfill contractual obligations to reimburse employees.

This does not mean that all employers must offer mileage reimbursements. But the law does mean that an employer cannot agree to a reimbursement and then fail to deliver it. 

What is the 2024 New York mileage rate?

New York does not have a standard mileage reimbursement rate for private companies. Instead, many businesses use the federal mileage reimbursement rate. For 2024, the IRS mileage rate is 67 cents per mile.

Rules for state vs. private employees

Employees of the state of New York receive the federal rate of 67 cents per mile when traveling for work. Private employers may choose a different rate or method to offset costs.

Taxable vs. non-taxable vehicle plans

There are three main approaches to paying employee vehicle costs. One is taxable, and the other two are tax-free if properly executed.

• Car allowance - typically taxable because there is no accounting procedure to prove business use of the payments
• Mileage reimbursement - non-taxable if paid at the federal rate or less and a proper mileage log is kept
• FAVR allowance - non-taxable if IRS guidelines are followed and a proper mileage log is kept

IRS mileage rate vs. FAVR rates in NY

A great option for New York employees is a FAVR reimbursement plan. FAVR plans are tax-free and designed to match localized costs. This approach works well for an organization seeking to pay competitive rates while staying on budget.

The less flexible IRS rate has a tendency to over-reimburse some workers and under-reimburse others. With FAVR, however, a driver in New York City will receive different rates than a driver in upstate New York. This approach avoids overpaying and underpaying but is more complex to administer. 

How to reimburse mileage in New York

Establishing a reimbursement policy

Employers should first establish a clear reimbursement policy that outlines the process, rates, and any necessary documentation. Remember that NY Labor Law Section 198-C requires employers to fully execute their reimbursement policies.

It is best practice to require employees to provide a copy of their insurance declarations page. This proves that they have sufficient car insurance to cover an accident that occurs on the job. Requiring this step as part of the reimbursement policy protects the company from vicarious liability.

Mileage log requirements

Whether you use the federal rate or a FAVR rate designed for reimbursement of mileage in New York, employees must keep detailed records. To keep the payments tax-free, you must comply with federal tax law. Here's what the IRS requires for a mileage log:

• Date and purpose of the trip
• Starting and ending locations
• Total miles driven

Many businesses use mobile apps instead of paper logs or spreadsheets. These mileage tracking apps keep accurate records, automate the process, and provide timely reports. They also provide insights into each driver's productivity.

Costs covered by New York travel reimbursements

A mileage reimbursement should cover a number of different costs. Some of these are fixed costs and some are variable costs.

Fixed vehicle costs

Fixed costs remain predictable regardless of how much you drive each month:

• insurance
• depreciation
• license
• registration

Variable costs

Variable costs increase the more you drive:

• fuel
• maintenance
• oil
• tires

Tolls, parking, and other costs

Other reimbursable expenses for vehicle travel can include tolls and parking fees. The employee must demonstrate that these expenses had a business purpose.

Choosing a fair New York mileage rate in 2024

New York mileage reimbursement law leaves employers free to choose how to offset employee vehicle expenses. The most competitive employers will choose a mileage rate that benefits employees while remaining cost-effective.

A FAVR plan provides the best business reimbursement method. FAVR separates out fixed expenses from variable expenses while using localized cost data. This approach ensures accurate payments to a range of employees. The employer can control costs and provide transparent payments.

To learn more about how a FAVR plan could benefit your New York employees, contact mBurse today.