How to write a 2026 mileage reimbursement policy for your technicians

This post is a policy guide for paying technicians back. It covers what to put in writing when employees drive their own vehicles for your business. For the rate itself, the business deduction and mileage log requirements, read the IRS mileage rate 2026 explainer.

Two rates, one calendar year

The IRS lists two business standard mileage rates for 2026: 72.5 cents per mile for January 1 through June 30, and 76 cents per mile from July 1 through December 31 (IRS standard mileage rates). Any reimbursement sheet that multiplies a full year of miles by one number is wrong for every trip on the other side of July 1. A written policy that names the rate and its dates prevents that.

How an accountable plan works

Most owners reimburse technicians under what the IRS calls an accountable plan. An arrangement qualifies when it meets three requirements: a business connection, substantiation, and returning amounts in excess of expenses. When it does, amounts paid under it are excluded from the employee's income and wages. If it misses any one of them, everything paid is treated as a nonaccountable plan and is included in the employee's income and reported as wages (IRS Rev. Proc. 2019-46, section 2).

• Business connection: the driving is for your business, not commuting or personal errands.
• Substantiation: the technician accounts for each trip within a reasonable period. For car expenses, IRS Publication 463 says records should show mileage for each business use and total miles for the year, and its sample log tracks date, destination, business purpose, odometer readings and miles.
• Returning excess: if you advance money, anything above substantiated expenses comes back within a reasonable period. Publication 463 gives examples of reasonable timing: an advance within 30 days of the expense, an accounting within 60 days after the expense, and returning any excess within 120 days.

One trap is a flat monthly car allowance paid whether or not anyone drove. Rev. Proc. 2019-46 treats amounts paid under a mileage allowance regardless of whether the employee incurs deductible business expenses as paid under a nonaccountable plan, which makes them wages.

Choosing a rate: IRS rate, a lower flat rate or FAVR

You have three practical choices, and each has a different tax and bookkeeping consequence.

• The IRS standard rate. Under Rev. Proc. 2019-46 (section 7.01), a mileage allowance is deemed substantiated at the lesser of the amount paid or the business standard mileage rate multiplied by substantiated business miles. Paying exactly the IRS rate on logged miles is the simplest arrangement to defend.
• A lower flat rate. Because the deemed-substantiated amount is the lesser of the two figures, paying less than the IRS rate does not create a tax problem under that section. It is a business decision, and it applies to every trip. This post does not cover other legal rules on what employers must repay, so confirm those before you set a number below the IRS rate.
• A FAVR allowance. A fixed and variable rate allowance is a mileage allowance using a flat rate or stated schedule that combines periodic fixed and variable payments meeting the requirements of Rev. Proc. 2019-46, section 6. It must rest on cost data from the employees' base locality, and an employee must substantiate at least 5,000 miles driven in a calendar year to be covered. It suits a large group of high-mileage drivers more than a crew of five. Set it up with a tax professional.

Paying more than the IRS rate

The opposite mistake costs more than it looks. Rev. Proc. 2019-46 (sections 7.01 and 8.01) treats the part of a mileage allowance that relates to substantiated miles but exceeds the standard rate times those miles as paid under a nonaccountable plan, which is subject to withholding and payroll taxes. If you paid 76 cents on a trip dated in March, the extra 3.5 cents per mile is not a free bonus. It is wages.

Applying the July 1 change

The rule that keeps a policy clean is to value each trip at the rate in effect on its own date:

• Trips dated January 1 through June 30, 2026 are valued at 72.5 cents per mile.
• Trips dated on or after July 1, 2026 are valued at 76 cents per mile.
• The trip date is the date of the drive, not the date the technician submits the log or the date you run payroll.
• A technician who logs a whole month at once, across June 30 and July 1, still gets two rates on that sheet.

A worked example

A technician drives 6,000 business miles between January and June and 7,000 between July and December. Here is the same year three ways:

• Split by trip date: 6,000 × $0.725 = $4,350, plus 7,000 × $0.76 = $5,320, for a total of $9,670.
• One rate, the new one: 13,000 × $0.76 = $9,880, which overpays by $210. That $210 is the 3.5-cent difference on the first-half miles, and by the rules above it is wages, not a reimbursement.
• One rate, the old one: 13,000 × $0.725 = $9,425, which underpays by $245.

Multiply that by a crew of ten and the error is a few thousand dollars in either direction. Technicians notice an underpayment faster than you notice an overpayment.

Where one-rate sheets go wrong

• The sheet was built in January and nobody changed the cell in July.
• The report totals miles first and multiplies second, so there is no trip date to split on.
• A technician logs a whole month at once, and the month straddles June 30 and July 1.
• Some trips use a company-set rate and others the IRS default, and the two are mixed in one column.

What to put in a written policy

A one-page policy is enough. It should answer each of these:

• Who is covered: which employees drive their own vehicles for work, and which use a company vehicle.
• What counts as business miles: job sites, supply runs and training, and what does not (a normal commute).
• The rate: the IRS rate, a lower flat rate or FAVR, with dates, including the July 1, 2026 change.
• How trips are recorded: date, destination, business purpose and miles for each trip, captured when the drive happens.
• When logs are due: a deadline that falls inside a reasonable period, such as the end of each pay period.
• How advances work: if you ever advance money, how the technician returns what was not substantiated.
• When you pay: a fixed day each cycle, so reimbursements are never mixed into regular wages by accident.
• Who approves: one named person, and what happens to a trip that is missing a purpose.

How FSM Navigator handles it

FSM Navigator logs each drive when a technician marks a job En Route and then Arrived, and it values the trip at the IRS rate in effect on the trip date in your company time zone. So 2026 reports handle the split IRS rate (72.5 cents before July 1, 76 cents from July 1) without a spreadsheet, and a report that covers both halves adds up correctly. If you set your own per-mile rate in company settings, that rate is used instead. See the mileage tracking page. Mileage tracking is on Pro and Enterprise.

Check your own sheet this week

• Open last month and this month and compare the rate used.
• Check whether any trip dated before July 1 still uses 76 cents.
• Decide whether you reimburse at the IRS rate or at your own rate, and write it down.
• Confirm every reimbursed trip has a date, destination, business purpose and miles.

This article is general information, not tax or legal advice. Confirm how to reimburse and deduct mileage with a qualified tax professional.

Sources

• IRS: Standard mileage rates (the 2026 business rates and their dates)
• IRS: Rev. Proc. 2019-46 (accountable plans, mileage allowances, FAVR)
• IRS: Publication 463, Travel, Gift, and Car Expenses (accountable plan rules and car expense records)