What is Mileage Reimbursement? A Quick Overview

If you drive your personal vehicle for work, you may be wondering how mileage reimbursement works and what expenses it covers. As an employee, it’s important to understand your company’s mileage reimbursement policy to ensure you’re being fairly compensated for the costs of using your own car for business purposes.

In this article, we’ll provide a quick overview of mileage reimbursement in Canada, including what it is, how it works, and what types of trips are eligible for reimbursement. We’ll also cover the CRA’s standard mileage rate, recordkeeping requirements, and some alternatives to traditional mileage reimbursement programs.

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What is mileage reimbursement?

Mileage reimbursement is the compensation an employer pays employees for using their personal vehicle for business purposes. This covers costs like gas, maintenance, insurance, and depreciation for the business use portion of the vehicle.

Employers typically reimburse employees at a cents-per-mile rate, which can vary by company. Some use the CRA standard mileage rate, while others set their own rate.

How does mileage reimbursement work?

To claim mileage reimbursement, employees track their business mileage, often using an app or mileage log. They submit expense reports detailing the date, miles driven, and purpose of each trip.

The employer then multiplies the total business miles by their designated cents-per-mile rate to calculate the reimbursement amount. Reimbursements are usually added to the employee’s next paycheck and are non-taxable up to the CRA standard mileage rate.

What mileage is eligible for reimbursement?

Mileage reimbursement generally covers business trips between offices or work sites during the workday, travel to meet clients or vendors, trips to run work-related errands, and travel to the airport or train station for business purposes. Commuting between home and a temporary work location may also be eligible.

However, employees’ normal commute between home and their regular office is not reimbursable. Personal side trips or errands during the workday and travel from home to a second job are also ineligible for reimbursement.

CRA mileage reimbursement rates in 2024

The CRA sets an optional standard mileage rate each year, which is 67 cents per mile for business travel in 2024. Employers can use this rate or set their own lower or higher rate.

Reimbursements at or below the CRA rate are generally non-taxable to the employee. However, amounts above the CRA rate are considered taxable income unless the excess is returned.

CRA Kilometric Rates for 2024

This table indicates the rates payable in cents per kilometre for the use of privately owned vehicles driven on business travel

Province/Territory	Cents/km (taxes included)
Alberta	53.5
British Columbia	58.0
Manitoba	56.0
New Brunswick	59.0
Newfoundland and Labrador	60.5
Northwest Territories	70.5
Nova Scotia	59.5
Nunavut	68.0
Ontario	60.5
Prince Edward Island	57.5
Quebec	58.0
Saskatchewan	55.0
Yukon	72.0

Mileage tracking requirements

To claim mileage reimbursement, employees must keep contemporaneous records of their business mileage. A compliant mileage log should include the date, destination, purpose and total miles for each trip.

Many companies allow employees to automate expense tracking using apps that capture trip details via GPS. This can simplify the process of submitting accurate mileage records for reimbursement.

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Alternatives to mileage reimbursement

While mileage reimbursement is a common way for employers to compensate employees for business use of their personal vehicles, it’s not the only option. Some companies provide a flat monthly car allowance to cover estimated costs, while others use a fixed and variable rate (FAVR) reimbursement that combines a monthly allowance with a cents-per-mile rate.

For employees who drive frequently for work, a company-provided vehicle may be a more cost-effective solution than mileage reimbursement or car allowances.

If you’re looking for a simpler way to manage mileage reimbursements and other business expenses, we can help. Our all-in-one corporate card and expense management platform streamlines the process, saving you time and hassle. Get started for free with Float today and see how easy expense management can be.

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