Mileage Reimbursement Explained

One multiplication, three tax authorities, and a logbook

The math behind a mileage reimbursement calculator is the simplest on Calc Dragon: total reimbursement equals distance multiplied by a rate per mile (or per kilometre), multiplied by the number of trips. There is no compounding, no second formula, no annual recalculation. Everything else around that one line — which rate to use, what counts as a business mile, whether the cheque shows up on your tax return as wages or as zero — is the actual work.

This article is the long version of what the calculator quietly does in one step. It walks through the IRS, HMRC, and CRA rates for 2024; explains why those rates are far higher than the cost of fuel alone; unpicks the tax line between a tax-free reimbursement and a taxable benefit; and covers the small, dull, mostly correct logbook rules that decide whether the deduction survives an audit. By the end, the single multiplication on the reimbursement page should be the easy part.

The formula, in one line

Mileage reimbursement is a multiplication of three numbers. Distance per trip — usually the one-way trip length, or the round-trip length if you set trips to 1. Rate per unit of distance — quoted in the currency of the country and matched to the same unit you used for distance. Number of trips — 2 for a there-and-back, 20 for ten round trips, however many you are claiming for.

Total = distance × rate × trips

The only rule the calculator imposes is unit consistency: miles must pair with rate-per-mile, kilometres with rate-per-kilometre. You can mix the unit between calculations but not within one. Plug in 100 miles at 67¢ and you get $67. Plug in 100 km at the same 67¢ and you get a meaningless number — the per-mile rate is bigger than the per-km rate it would correspond to (because a mile is longer than a kilometre).

The 2024 rates: IRS, HMRC, CRA

These are the three rates the calculator exists to multiply. They were set by tax authorities, not by accountants guessing — each one is the output of an annual fixed-and-variable-cost study of running a personal vehicle, except the UK figure, which has been frozen for over a decade.

United States — IRS standard business mileage rate

67¢ per business mile for tax year 2024 (IRS Notice 2024-08, announced December 14, 2023 as IR-2023-239). The medical and moving rate is 21¢ per mile, restricted since the 2017 Tax Cuts and Jobs Act to active-duty military moving on orders. The charitable rate sits at 14¢ per mile and is fixed by statute, not by IRS notice — Congress has not raised it since 1998. For 2023 the business rate was 65.5¢; for 2022 the IRS announced a mid-year increase from 58.5¢ (Jan-Jun) to 62.5¢ (Jul-Dec), the only split rate in a generation, after the fuel-price spike.

United Kingdom — HMRC Approved Mileage Allowance Payments (AMAP)

45p per business mile for the first 10,000 miles in a tax year (6 April to 5 April), then 25p per mile thereafter. Motorcycles are a flat 24p, bicycles 20p. These rates have not moved since the 2011/12 tax year — over a decade of fuel-price inflation, insurance increases, and vehicle-purchase cost rises have not budged them. The result is that the UK AMAP rate now sits noticeably below the true running cost of a modern car, which is exactly why Mileage Allowance Relief exists (more below). The thresholds reset each tax year, so a driver who exceeds 10,000 business miles on 5 March is back to 45p/mile from 6 April.

Canada — CRA reasonable per-kilometre allowance

70¢ per kilometre for the first 5,000 business km in the calendar year, then 64¢ per kilometre thereafter, for the 2024 tax year. Drivers based in the Northwest Territories, Nunavut, or Yukon get an extra 4¢/km on top across both bands, recognising remote-area operating costs. The CRA labels these as "reasonable" rather than mandatory: an employer can pay more or less, but only an allowance at or under the reasonable rate is treated as tax-free reimbursement. Anything above is included in employment income on the T4 slip.

Worked example: a US sales rep and a UK consultant

A US-based sales engineer drives 100 miles to a customer site, has lunch, and drives 100 miles back. The trip is one round trip, but because the reimbursement calculator takes distance per trip and number of trips as separate inputs, the cleanest entry is distance = 100 miles, trips = 2 (out, then back). At the 2024 IRS rate of $0.67/mile:

100 × 0.67 × 2 = $134.00

Tax treatment: the employer reimburses $134.00 tax-free; nothing flows to the W-2 because the payment is at the IRS standard rate. The engineer keeps a contemporaneous mileage log (date, destination, business purpose, odometer readings) in case of audit.

Now take the same trip in the UK. A consultant in Manchester drives 100 miles to a client in Birmingham and back, before the 10,000-mile annual cap. At 45p/mile:

100 × 0.45 × 2 = £90.00

If the employer reimburses the full £90, it is tax-free under AMAP. If the employer pays a flat £50, the consultant can claim Mileage Allowance Relief on the £40 shortfall in their self-assessment return — assuming they are inside self-assessment in the first place, which most UK PAYE employees are not, in which case it goes on a P87 form instead. Same multiplication, two pieces of paperwork.

Where the per-mile rate actually comes from

The single most common misunderstanding around mileage reimbursement is that the rate is meant to cover fuel. It is not. The IRS 67¢/mile is roughly four times the cost of fuel alone for a 25-mpg car at $3.50 a gallon: $3.50 ÷ 25 ≈ 14¢/mile in pure petrol. The rate bundles the marginal cost of running a personal car on business miles:

• Fuel and oil
• Tyres, including extra wear from added mileage
• Routine maintenance and repairs
• Insurance (the business-use portion)
• Vehicle registration and tax
• Depreciation — the largest single component for newer cars

Depreciation is the one most people miss. A new car that does 15,000 miles a year loses roughly 15-20% of its value annually, and a significant chunk of that loss is mileage-driven. When the IRS runs its annual passenger-car fixed-and-variable-cost study, the depreciation slice often makes up 25-30% of the per-mile figure on its own. That is also why if your employer pays a "fuel-only" reimbursement of, say, 15p/mile in the UK while AMAP says 45p, you are not being reimbursed for vehicle wear — and Mileage Allowance Relief is the lever for clawing it back. The fuel cost calculator answers the pure-petrol number, the reimbursement calculator answers the all-in figure.

Tiered rates: HMRC and CRA

Two of the three rates step down once you exceed an annual threshold. UK drivers paying themselves AMAP cross the 10,000-business-mile line and the rate falls from 45p to 25p per mile. Canadian drivers cross 5,000 business km and the rate falls from 70¢ to 64¢ per km. The calculator does not encode either tier — it is intentionally one rate, multiplied — so for a driver who straddles the threshold, run it twice:

• UK driver, 14,000 business miles total: first run uses distance = 10,000, trips = 1, rate = £0.45 → £4,500. Second run uses distance = 4,000, trips = 1, rate = £0.25 → £1,000. Total AMAP entitlement: £5,500.
• Canadian driver, 8,000 business km total: first run uses distance = 5,000, trips = 1, rate = C$0.70 → C$3,500. Second run uses distance = 3,000, trips = 1, rate = C$0.64 → C$1,920. Total reasonable allowance: C$5,420.

The IRS does not tier the standard business rate — 67¢/mile is 67¢/mile whether you drive 500 business miles a year or 50,000. Your log has to support every one of them.

Standard rate or actual vehicle expenses?

US self-employed taxpayers choose, year by year for new vehicles, between the standard mileage rate (multiply business miles by 67¢ on Schedule C) and the actual-expense method (track every fuel receipt, insurance bill, repair invoice, and the depreciation schedule, then apportion the lot by business-use percentage). The actual method is more paperwork but can pay off for expensive or low-MPG vehicles where depreciation alone exceeds 67¢/mile.

The trap: if you use the actual-expense method in the first year a vehicle is in business use, you can never switch to the standard rate for that vehicle. Going the other direction is allowed (start on standard, switch to actual later) but the depreciation method is forced to straight-line once you do. The decision in year one is the only one that locks in.

UK employees do not get the choice — only AMAP applies to claiming relief on personal-vehicle business travel via PAYE or self-assessment. UK sole traders running a business can choose between AMAP-style simplified expenses and full actual-expense tracking with capital allowances, but the choice is per vehicle for the life of that vehicle in the business.

The logbook: contemporaneous wins audits

Every tax authority that allows mileage reimbursement or deduction wants a mileage log. The IRS, HMRC, and CRA all accept paper, a spreadsheet, or an app export, and all three want it kept contemporaneously — at or near the time of travel, not reconstructed the following April. The minimum entries:

• Date of trip
• Business purpose (named customer, project, or destination)
• Starting odometer (or starting location for app-tracked logs)
• Ending odometer (or ending location)
• Business miles for the trip

For high-mileage drivers, the apps largely solve this — MileIQ, Driversnote, Everlance and similar pull each trip from your phone's GPS and let you swipe right (business) or left (personal) the next morning. A year of business mileage at 67¢/mile is usually a four-figure deduction, and a year of swipes is the cheapest piece of audit insurance you can buy.

Common mistakes

Claiming the commute

The drive from home to your regular place of work is private travel in every jurisdiction the calculator covers. It is not reimbursable, not deductible, not on the log at all. Exceptions exist — a registered home office that qualifies as your principal place of business under IRS rules, or a "temporary workplace" under HMRC's 24-month test — but the default is: home to normal office is private.

Mixing units

Plugging miles in for distance and a per-km rate (or vice versa) gives a numerically valid but completely meaningless answer. The IRS, HMRC, and Canadian rates all sit in different orders of magnitude per unit because the units themselves are different sizes — 1 mile is 1.609 km, so the per-km equivalent of 67¢/mile is about 41¢/km. Keep them paired.

Treating reimbursement above the rate as tax-free

Generosity is taxable. An employer paying 80¢/mile when the IRS rate is 67¢/mile owes 13¢/mile in extra wages — the excess is ordinary income, payroll-tax bearing, and ends up on the W-2. Same logic applies in the UK: anything above 45p/25p goes on the P11D as a benefit-in-kind. The calculator does not flag this — it multiplies whatever rate you give it.

Logging by guesswork in April

"I drove about 12,000 miles last year, mostly for work" is not a log. It is a reasonable estimate that does not survive an IRS audit or an HMRC compliance check. The whole point of the contemporaneous record is that it was created when the driving happened, not when the tax return was due. Reconstruction after the fact is the single most common reason mileage deductions get disallowed.

When to seek professional advice

Routine business mileage with a clean log and a sensible rate is bookkeeping, not advice. The cases worth a real conversation with an accountant or tax adviser:

• A mixed-use vehicle where the business-use percentage is close to the line between standard mileage rate and actual expenses being the right pick — particularly an expensive new car in the first year.
• Heavy international business travel where you are reimbursing in one currency under rules from another — the calculator does the maths but the tax treatment is genuinely complex.
• Anything involving a company car alongside personal mileage in a self-employed business — the rules around capital allowances and personal-use add-backs are not friendly to DIY.
• A historical reimbursement dispute with HMRC or the IRS — these almost always benefit from a tax adviser who has seen the same fact pattern before.

Related calculators

• Mileage Reimbursement Calculator — distance × rate × trips for IRS, HMRC, and CRA rates
• Fuel Cost Calculator — pump cost of a trip from distance, economy, and price per litre
• Gas Mileage Calculator — mpg or L/100km from distance and fuel used at the pump
• Fuel Consumption Converter — mpg (US), mpg (UK), L/100km, and km/L in one place
• Distance Converter — miles, kilometres, feet, and metres