The IRS standard mileage rate is used to calculate the amount of a deductible for businesses, but it is optional, and businesses can—and often do—calculate their own rate for mileage reimbursement. There are no hard and fast laws governing how businesses should go about calculating reimbursement, though.

Businesses can request that employees keep track of their actual travel-related expenses, but this makes accounting and expense reporting a tedious process. They can also simply use the annually released IRS standard mileage rate, or they can reimburse at a rate lower than what the IRS suggests. In this case, employees can deduct their mileage reimbursements from their gross income or the IRS’ standard rate multiplied by the number of miles driven for work, whichever is less.

How is the IRS Standard Mileage Rate Determined?

For businesses that would prefer to keep things simple, they can follow the suggested mileage rate issued each year by the IRS. These rates are based “on an annual study of the fixed and variable costs of operating an automobile,” according to the most recent news release on the subject. For 2024, the standard mileage rate for businesses is 67 cents per mile, an increase of 1.5 cents from 65.5 cents per mile in 2023.

According to critics, the issue with these annually-fixed, national rates is that they do not account for variables such as location and fluctuating fuel prices. Fuel only accounted for 30% of the overall cost of operating a vehicle, though. As well as gas, fixed and variable costs include depreciation, insurance, repairs, tires and maintenance. Depreciation accounted for the largest percentage of cost at 45%.

With so many different factors influencing the standard mileage rate, is no surprise that the number the IRS lands on doesn’t work for every business. Fortunately, while there are some notable exceptions, the reimbursement rate you decide to use is up to you. 

What are Other Businesses Paying in Mileage Reimbursement?

A CompanyMileage analysis found that in 2023, our customers on average reimburse at a rate of 0.589. The middle 90% of our customers have an average rate of 0.597, and 59.14% of our customers reimburse at a rate over 60 cents. 

While many of our customers opt to use a rate lower than the IRS rate, 50% of our customers are currently reimbursing at a rate equal to or higher than the IRS rate. It’s completely acceptable to reimburse at a rate higher than what the IRS has set, but be aware that when you do this, any payments made in excess of the IRS rate will not be tax deductible. 

Over time, companies’ reimbursement practices have more or less remained consistent. When we compare how companies reimbursed in 2023 to 2019 (the last time we conducted such an analysis), we can see that they reimburse at a rate that is about 10-15% less than the IRS rate on average.

Calculate Expenses and Exact Mileage to be Reimbursed

Reimbursing employees for miles driven for work has traditionally been based on a system that lacks in accountability and is rife with inaccuracies. Employees would submit claims based on odometer readings, never needing to account for side trips or mileage estimates.

Rather than relying on the total miles driven, SureMileage by CompanyMileage calculates the exact mileage to be reimbursed from point A to point B. Employees simply report their starting and ending points, and the system calculates the driving distance between them. Automated mileage tracking prevents reporting inconsistencies. Point-to-point reimbursement also eliminates IRS-disallowed travel such as side trips from the reimbursement equation.

Customers save 20-30% on mileage reimbursement expenses, and employees report a more seamless and less time-consuming expense reporting process. No matter what you pay in mileage reimbursement, CompanyMileage makes managing these activities more secure, accurate, and easier. Request a free demo today to see how it works!