Cents-per-mile (CPM) is one of the most straightforward ways for companies to reimburse their employees who drive their personal vehicles for work. The concept is simple: multiply business miles driven by a set rate, and that’s what the employee gets reimbursed.
For example, if you use a rate of $0.50 per mile and one of your team drove 100 miles, you would pay them $50 in reimbursement (100 * 0.50).
While you can come up with your own rate, for a number of reasons, most companies choose to go with the simpler path - using the IRS standard business mileage rate.
If any of that seems confusing, you’re in the right place. Here’s everything you need to know about cents-per-mile employee reimbursement.
Related: Mileage Reimbursement Explained
How to Choose the Right Mileage Rate
As described above, CPM is relatively simple. Your team drives X miles, and you reimburse them a set amount of money per mile they drove. But how do you determine that amount?
In theory, your reimbursement to your team should strike the middle ground between what your company can afford and what is a fair reimbursement to your team for the business use of their personal vehicles.
While you could determine your own rate, most companies don’t. Determining a rate can be very complicated, and you run certain risks - namely, if you under-reimburse them and their wages fall below minimum wage, or you over-reimburse and their reimbursements become taxed.
To make things simple, the IRS releases a rate every year that it uses for managing self-employed workers’ tax deductions.
Many businesses choose to use that rate instead of determining their own, since the IRS, in this case, is doing the work of determining the various fixed and variable costs of owning and operating a vehicle for work for you.
The IRS Standard Business Mileage Rate Explained
Every year, the IRS releases their standard business mileage rate based on its determination of the costs of using a vehicle for work.
Note that this is a national average. In some localities, the IRS’s rate may represent slight over- or under-reimbursements. If a more specific mileage reimbursement method sounds appealing to you, you can learn more about them and other reimbursement methods here.
Related: How Is the Standard IRS Mileage Rate Determined? | IRS Mileage Rate Breakdown Explained
For 2026, the IRS standard business mileage rate is 72.5 cents per mile. So, if you choose to use this rate, you would pay your employees $0.725 per mile they drive. If they drive 100 miles, you pay them $72.50.
This rate is designed to cover all the costs associated with using a personal vehicle for work: fuel, maintenance, insurance, depreciation, and general wear and tear. It’s the rate the IRS uses to determine what qualifies as a reasonable, tax-free reimbursement.
What Counts as Business Mileage
Not every mile an employee drives should qualify for reimbursement. Reimbursable business miles include driving between job sites, traveling to client meetings, running errands for an employer, and trips to temporary work locations.
If the purpose of the drive is to perform a work task and is not your regular commute, it almost certainly will qualify as business mileage.
The Commute Rule
Driving from home to your regular workplace and back is not reimbursable business mileage. The IRS considers this personal commuting regardless of how far the drive is or how often the employee makes it.
However, there are some edge cases to consider.
For example, if an employee drives from home directly to a client’s office or a temporary work location before heading to their regular workplace, those miles can qualify. Remote workers who have a home office as their primary work location may also have more flexibility, but that’ll depend on how their policy is structured.
Related: Is Mileage Reimbursement Considered Taxable Income?
Mixed purpose trips should be handled carefully. If an employee runs a personal errand in the middle of a business drive, only the business-related portion of the route is reimbursable.
Many employers include tolls and parking as separately reimbursable items alongside mileage. These are legitimate business expenses that don’t need to be folded into the per-mile rate.
How to Run a CPM Reimbursement Program
Setting up a cents-per-mile reimbursement program doesn’t require complex infrastructure, but it does require consistent management to keep reimbursements tax-free.
Accountable Plan Basics
For CPM reimbursements to be tax-free to your team, they need to meet IRS accountable plan requirements. Here are the three steps:
- Business connection: All miles reimbursed must be for legitimate work purposes.
- Substantiation: Employees must document the date, miles, destination, and business purpose for each trip.
- Return of excess: If the employer offers funds in advance or overpays relative to the miles the driver substantiated, the excess must be returned.
How to Calculate Reimbursements with Cents-Per-Mile
The math is relatively straightforward once your team has their mileage properly documented:
Step 1: Choose your reimbursement rate. As we discussed, most employers use the standard IRS business mileage rate (currently 72.5 cents per mile in 2026).
Step 2: Set a reporting cadence and define the required fields for your team’s mileage logs (date, miles, destination, purpose).
Optional: Use an automatic mileage tracker app to make mileage tracking faster, more accurate, and more secure for your team and business.
Step 3: Employees submit their mileage reports for the period you defined.
Step 4: Multiply an employee’s business mileage by the rate you have chosen, then add any separately approved business expenses.
Step 5: Approve and pay your team.
Related: How to Calculate Your Mileage for Reimbursement
Here’s a quick example: an employee who drives 212 business miles in a pay period at the 2026 rate would receive 212 * $0.725 = $153.70.
Once again, you can use your own rate that’s higher than the IRS recommendation, but any amount above the standard rate will be treated as taxable wages.
Cents-Per-Mile Reimbursement Pros and Cons
CPM reimbursement works well for a lot of teams and businesses, but it’s not the right fit for everyone. For instance, CPM doesn’t account for differences in vehicle type, local fuel costs, or ownership expenses.
Situations like high-mileage drivers in an expensive market feeling undercompensated while a low-mileage driver in a cheaper area gets an advantage. Employees who have significant fixed ownership costs but drive inconsistently can also feel shortchanged by a pure per-mile model.
If those potential issues may be a concern, there are some alternatives worth knowing about.
Related: Mileage Reimbursement Method Comparison
A flat car allowance is simpler, but is usually taxed and can present additional headaches as the reimbursements are far more inaccurate than CPM.
Actual expense reimbursements are more accurate, but far more administratively intensive. FAVR (fixed and variable rate) programs offer the most precision for geographically dispersed teams, combining a lump sum payment to cover fixed costs with a variable per-mile rate, but they’re considerably more complex to set up and administer.
For most businesses of any size, CPM hits the right balance of simplicity and fairness.
Cents-Per-Mile FAQ
Q: What is the IRS mileage rate for 2026?
A: The 2026 IRS standard mileage rate for business driving is currently 72.5 cents per mile.
Q: Do EVs or hybrids use a different reimbursement rate?
A: No, the IRS standard mileage rate applies to all personal vehicles regardless of fuel type.
Q: Is commuting reimbursable?
A: No. Driving between home and the workplace is considered personal commuting and most businesses do not allow those drives to qualify for reimbursement.
Q: What mileage log details are required?
A: At minimum, logs should include the date, number of miles driven, starting point and destination, and the business purpose of the trip.
Cents-Per-Mile Explained - Conclusion
There’s a reason CPM tends to be the most popular employee mileage reimbursement method. Its combination of simplicity and accuracy strike a solid middle ground that most businesses and employees find satisfactory.
Curious about getting a cents-per-mile reimbursement system set up for your team? You’re in the right place!
Schedule a complimentary demo of TripLog today and see why a dedicated reimbursement management solution and automatic mileage tracker is the best way to get a CPM system going for your team.
