Caregiver Mileage Reimbursement: Rates and Policies
Federal law requires reimbursement only when car costs push pay below minimum wage; California and Illinois require it outright. The 2026 IRS rate is 72.5 cents, 76 cents from July 1.
By Caregiver Scheduling Team ·
Federal law doesn’t require mileage reimbursement directly, but a caregiver’s car costs for your business can’t push her pay below minimum wage, and California and Illinois require employers to reimburse necessary business expenses outright. Most agencies reimburse miles between clients and client errands at or below the IRS business rate, which keeps the payment tax-free with a mileage record. For 2026 that rate is 72.5 cents a mile from January through June and 76 cents from July 1.
Do you have to reimburse caregiver mileage?
Under federal law, only when not doing so cuts into minimum wage. The FLSA’s “free and clear” rule says wages aren’t really paid if the employee has to spend part of them on costs that are primarily for the employer’s benefit, and tools or equipment the job requires count (29 CFR 531.35). A caregiver’s car used to get from client to client is that kind of cost. If her pay minus unreimbursed vehicle costs falls below the applicable minimum wage in any workweek, you have a violation even though you never touched her paycheck.
Some states go further and require reimbursement regardless of wage level:
| Jurisdiction | Rule | Source |
|---|---|---|
| Federal | Reimburse enough that pay net of car costs stays at or above minimum wage | 29 CFR 531.35 |
| California | Employer must indemnify employees for all necessary expenditures incurred in direct consequence of their duties | Labor Code 2802 |
| Illinois | Employer must reimburse necessary expenditures within the scope of employment; employee submits within 30 days unless a written policy allows more | 820 ILCS 115/9.5 |
Other states have similar laws. Check yours at caregiver pay by state.
Which miles count?
Trips during the workday count; the commute doesn’t. The same line divides paid travel time from unpaid time (29 CFR 785.38), so reimburse miles on the trips you already pay as hours.
| Trip | Reimburse? | Why |
|---|---|---|
| Home to first client | No | Ordinary commute |
| Client to client, same day | Yes | Travel in the day’s work |
| Driving the client to an appointment or on errands | Yes | Care task done in the caregiver’s car |
| Client to office for a required meeting, then to a client | Yes | Travel during the workday |
| Last client to home | No | Ordinary commute |
Drive time on the “yes” trips is also paid time and counts toward overtime. See caregiver travel time pay.
Do you have to use the IRS rate?
No, but it is the safe default. Reimbursement at or below the IRS rate, backed by a mileage record showing date, miles and business purpose, is an accountable plan under 26 CFR 1.62-2: it needs a business connection, substantiation, and return of any excess. Payments that meet those tests aren’t wages, so no payroll tax and nothing on the W-2.
Pay more than the IRS rate and the excess is taxable wages. Pay less and the payment is still tax-free, but you must confirm pay net of the unreimbursed share stays above minimum wage, and in California and Illinois that the caregiver’s actual necessary costs are covered. A flat monthly car allowance with no mileage record is taxable wages in full.
What does mileage cost an agency?
Take a caregiver with four visits a day, six miles between visits, five days a week:
| Item | Weekly |
|---|---|
| Miles between clients (3 trips x 6 miles x 5 days) | 90 miles |
| Reimbursement at $0.76 | $68.40 |
| Paid drive time (3 trips x 15 minutes x 5 days) at $17 | $63.75 |
| Total travel cost | $132.15 |
Across 20 caregivers that is about $137,000 a year. Shaving two miles off the average trip saves about $23 a week per caregiver, or about $24,000 a year across 20. Cluster clients by neighborhood when you assign them, and order each day on a map. See caregiver route planning and caregiver payroll burden.
What should a mileage policy say?
Which trips are covered, the rate, how miles are recorded, and when they are paid. Keep it to one paragraph:
Caregivers are reimbursed for miles driven between client visits during the workday and for client transportation and errands, at [rate] per mile. Commuting between home and the first or last visit of the day is not reimbursed. Miles are recorded [in the caregiver app / on the mileage log] by the end of each shift and paid with the next payroll.
Put the rate in writing before the caregiver drives and update it when the IRS rate changes. If you bill clients for transportation, say so in the client service agreement. See home care payroll.
How Caregiver Scheduling handles this
Route optimization orders each caregiver’s day on a map and shows open shifts next to the caregivers already nearby, which cuts miles before they’re driven. GPS-verified check-ins and check-outs show which trips were client-to-client and which were the commute. Timesheets and payroll export built from those visits are coming soon. $199/month for up to 10 caregivers or $299/month for up to 50, free for 30 days.
FAQ
Do I have to use the IRS rate? No. Up to the IRS rate is tax-free with a mileage record. Above it is taxable, and below it you must still keep pay above minimum wage and meet any state reimbursement law.
Is mileage reimbursement taxable to the caregiver? Not at or below the IRS rate under an accountable plan. The excess above the rate, or any allowance without records, is wages.
Do I reimburse the drive to the first client? No. Home to the first client and last client to home is commuting, unless the caregiver first reports to the office for work.
Can I bill clients for mileage? Yes, for client transportation and errands, if the service agreement says so.
What if a caregiver doesn’t submit miles? Set a deadline in your written policy. Illinois lets you require submission within 30 days or longer; California has no such deadline, so collect the log every shift.
This article is general information, not legal or tax advice. Check your state’s expense-reimbursement and wage rules.