How much do most businesses pay for mileage reimbursement? That depends on the location and industry. Here's your guide to choosing a suitable mileage rate.
Typical Mileage Reimbursements
For a mileage reimbursement, typically an employer pays a set cents-per-mile rate to cover travel costs. This rate is intended to cover both the costs of owning and operating a vehicle for work purposes.
Businesses often pay the federal mileage rate to employees. But this rate is not always the most suitable or affordable. Many businesses will instead use a rate that better fits their location and industry.
Importance of Knowing the Rate
It is always important to know both the federal mileage rate and any state or local rules about mileage reimbursements. This helps ensure that your mileage reimbursements comply with laws and remain tax-free. Awareness of standard mileage rates also helps businesses determine a competitive rate.
To learn more about state laws governing mileage reimbursements, read our guide. The states with the most strict laws are California, Illinois, and Massachusetts. It is also true that regions with higher cost of living often have higher average reimbursement rates.
Current Average Mileage Reimbursement Rate
Average Mileage Rate 2025
The federal mileage rate for 2025 is 70 cents per mile. IRS publication 463 also identifies an alternative federal rate called fixed and variable rate. This rate, also known as FAVR, uses the value of a specified vehicle and its associated costs in a specific zip code to determine rates. That makes FAVR more precise than the average rate.
The federal standard rate of 70 cents per mile represents the average cost per mile of vehicle travel. However, many businesses prefer to pay less than that rate, especially if their drivers are based in less expensive parts of the country. That means the actual average mileage rate is probably less than the federal rate.
Average Mileage Rate 2024
In 2024 the standard federal mileage rate was 67 cents per mile. While this is no longer the current standard business rate, businesses and individuals may use it to calculate tax deductions on their 2024 taxes.
Historical Comparison of Mileage Rates
Rate for Mileage 2023: 65.5 cents per mile
Rate for Mileage 2022: 62.5 cents per mile (increased mid-year from 58.5 cents/mile)
Rate for Mileage 2021: 56 cents per mile
Rate for Mileage 2020: 57.5 cents per mile
Rate for Mileage 2019: 58 cents per mile
Factors Affecting Mileage Reimbursement Rates
Vehicle costs and IRS mileage rates
The main factors affecting mileage rates are the changing costs of owning and operating a vehicle. When gas prices and insurance costs rise, you can expect the IRS to increase its standard mileage rate. Other costs that affect the rate include depreciation and maintenance/repairs.
Regional vehicle cost differences
Regional differences will also affect mileage reimbursement rates for different places. A Colorado mileage reimbursement will tend to be a bit lower than a California mileage reimbursement. This is because Colorado has prices around the U.S. average, while California is way above the average. An average South Carolina mileage reimbursement might be lower than both places because that state has prices below the national average.
Calculating Mileage Reimbursement
How Much to Pay Per Mile
To calculate an appropriate mileage rate, start by considering the federal standard business rate. If that rate seems high for the work location, consider a lower rate. It helps to get benchmarks from competitors and from similarly-sized businesses in other industries. Alternately, consider adopting a fixed and variable rate, which guarantees local price sensitivity.
Determining the Rate for Different Purposes
An organization with employees in a variety of roles may choose a variety of mileage reimbursements. These different rates may reflect the frequency and distance of travel. For employees who rarely travel using a vehicle, choosing a precise rate is less important. But for employees who travel multiple times each week by vehicle, it is crucial to get the rate right.
Read More: How much is a fair mileage rate?
Best Practices for Employers
Mileage tracking apps
Mileage reimbursements can be very expensive if drivers self-report their mileage. Systems like mileage spreadsheets can lead to overestimates and even mileage fraud. This is why its best practice to adopt an automated mileage tracking system. A mobile app that tracks mileage is convenient for the driver and saves money for the employer.
Explore mLog, our mileage tracking app, or read up on how to choose the best mileage tracking app in 2025.
Choose FAVR over standard rates
Another problem with paying a standard mileage rate is overpayment and underpayment. This is why many businesses choose to pay a rate less than the federal rate. But this can lead to under-reimbursement of employees who do not drive enough to cover their base costs.
Using a fixed and variable rate plan ensures a fair, competitive rate while protecting the organization from overpaying or underpaying. The rates vary by driver and change over time to reflect the increase or decrease in costs.
