Mileage reimbursement

Mileage reimbursement refers to the compensation an organization provides to employees who use their personal vehicle for business trips.

It is built on the idea that driving a personal car for business incurs real costs, including fuel, maintenance, insurance, wear and tear, and depreciation. Rather than expecting employees or contractors to absorb those expenses themselves, mileage reimbursement ensures they are paid back at a standardized rate for each mile driven.

Typically, a government agency (e.g., the IRS in the US) sets a per-mile rate each year based on studies of average vehicle operating costs. Employers can choose to follow that rate or set one of their own, though using the IRS rate is common because it aligns with tax rules. 

When an employee needs to drive somewhere for a work-related reason (e.g., to visit a client or attend a meeting), they record the starting and ending mileage of the vehicle or the total distance traveled. They then submit those details to the company, and the reimbursement amount is calculated by multiplying the number of miles driven by the approved rate per mile.