MilometryAccountable plans: how American employers pay mileage tax free
Most US employees cannot deduct a business mile themselves, so the tax free route runs through the employer. What an accountable plan is, the three conditions it has to meet, and what happens to a payment above 76 cents.
Algemene informatie, geen advies. Geschreven als algemene informatie en voor zover wij weten juist op 23 oktober 2026. Belastingregels veranderen, en hoe ze uitpakken hangt af van je eigen situatie. Dit is geen belasting-, juridisch of financieel advies: vraag een accountant, een belastingadviseur of de Belastingdienst voordat je erop vertrouwt.
A British employee who is paid less than the approved rate can claim the shortfall back from HMRC. An American employee in the same position generally cannot. Unreimbursed employee business expenses stopped being deductible for most employees from 2018, and the One Big Beautiful Bill Act of 2025 made that permanent. So in the United States the question that matters is not what you can claim, it is how your employer pays you, because the way the money is paid decides whether it is taxed.
The answer the IRS gives is the accountable plan.
What an accountable plan is
An accountable plan is an employer's reimbursement arrangement that meets three conditions set out in IRS Publication 463:
- Business connection. The expenses were incurred while performing services as an employee.
- Adequate accounting. The employee accounts for the expenses to the employer within a reasonable period of time.
- Return of any excess. Anything paid over what was accounted for is returned within a reasonable period of time.
Meet all three and the reimbursement is not wages. It does not go in box 1 of the employee's Form W-2, and the employee does not report it or the expenses on their own return. Miss any one of them and the arrangement is a nonaccountable plan: the whole payment is reported as wages, taxed like salary, and the employee is left with expenses they generally cannot deduct.
None of this is a separate scheme an employer signs up to. It is a description of how reimbursements are handled, and the employer either handles them that way or does not.
What a reasonable period is
The IRS does not leave "reasonable period" entirely open. Publication 463 gives safe harbour periods that are treated as reasonable:
| Step | Treated as reasonable if done within |
|---|---|
| Receiving an advance | 30 days of the expense |
| Accounting for the expense | 60 days after it was paid or incurred |
| Returning any excess | 120 days after the expense |
| Responding to a periodic statement (sent at least quarterly) | 120 days after the statement |
An employer can run a different timetable, but these are the ones the IRS has already accepted. A monthly mileage claim submitted at the end of each month sits comfortably inside them.
How mileage fits: the 76 cent ceiling
For 2026 the IRS business standard mileage rate is 72.5 cents a mile for driving from 1 January to 30 June, and 76 cents a mile from 1 July to 31 December. The midyear rise came in Announcement 2026-11, which the IRS put down to recent increases in the price of fuel.
The rate matters to employees for a different reason than it matters to the self employed. When an employer pays a mileage allowance at or below the federal rate, under an accountable plan, the allowance is generally treated as proof of the amount of the expense. The employee does not have to show what the fuel, insurance and wear actually cost.
What the allowance does not prove is everything else. Publication 463 is clear that the employee must still prove the time, place and business purpose of the travel. Paying 76 cents a mile does not remove the need for a log; it removes the need for receipts behind each mile. The mileage itself, where you drove, when, and why, is still the employee's to record and the employer's to keep.
Paid more than the federal rate
Some employers pay above the IRS rate, often a flat figure that has not been revisited. That does not break the plan, but it splits the payment in two:
- the amount up to the federal rate is shown in box 12 of Form W-2 under code L and is not taxable;
- the excess is included in box 1 as wages.
So an employer paying 85 cents a mile in the second half of 2026 is paying 76 cents tax free and 9 cents as salary on every business mile. The employee does not need to do anything about it, but the payslip will show more taxable pay than the headline rate suggests, and that surprises people.
Paid less than the federal rate, the whole allowance is tax free and the employee generally has nothing to claim on top. This is the clearest difference from Britain, where the gap between what the employer pays and 55p is relief the employee can ask HMRC for.
The self employed are a separate case
Everything above is about employees. A self employed driver files Schedule C and deducts their own car costs, and for them the standard mileage rate is a method of calculating the deduction: business miles multiplied by the rate, in place of a share of actual costs. Publication 463 adds a condition that catches people out: to use the standard rate for a car you own, you must choose it in the first year the car is used in your business. Choose actual costs that year and you cannot switch to the standard rate for that car later.
The self employed driver also needs the log. The standard rate replaces the record of costs, never the record of the trips.
Why the record carries the weight
In both cases the IRS is relying on the same thing: a contemporaneous record of the business miles. For an employee, the log is what turns an allowance into an accountable reimbursement. For the self employed, it is what supports the deduction. The rate does the arithmetic; the log is the evidence that the arithmetic was applied to real business trips.
Milometry records each drive with its date, start, end and distance and lets you mark it business or personal, which is the record both routes rely on. Whether the result goes to an employer as an accountable claim or to a Schedule C is up to you and your adviser.
This is general information, not legal or tax advice. Claim figures are estimates, and how a particular reimbursement is treated depends on the plan your employer actually runs.
Sources
- Publication 463, Travel, Gift, and Car Expenses, IRS. Chapter 6 covers accountable and nonaccountable plans, the reasonable period safe harbours, mileage allowances and Form W-2 reporting; chapter 4 covers the standard mileage rate and the first year rule.
- Standard mileage rates, IRS. The 2026 rates for both periods.
- IRS sets 2026 business standard mileage rate at 72.5 cents per mile, IRS news release IR-2025-128.
- Internal Revenue Bulletin 2026-29, IRS. Announcement 2026-11, raising the business rate to 76 cents from 1 July 2026.
