Michigan Mileage Reimbursement Law: IRS Rate, Policy, and Taxes

Michigan mileage reimbursement law does not require employers to pay you for driving your personal vehicle on the job. What the law does do is make an employer’s written promise to reimburse legally enforceable, and separately prevent unreimbursed vehicle costs from dropping your effective pay below minimum wage. For 2026, the IRS standard business mileage rate is 72.5 cents per mile, and most Michigan employers who reimburse use that figure as their benchmark.¹

No State or Federal Mandate

Michigan has no standalone statute requiring mileage reimbursement. The federal Fair Labor Standards Act doesn’t require it either. A 2020 U.S. Department of Labor opinion letter confirmed that the IRS business mileage rate is “not legally mandated” for reimbursement, though it is “presumptively reasonable” when an employer chooses to reimburse.² Most Michigan employers do reimburse in practice, either voluntarily or through collective bargaining agreements, but nothing in state or federal law forces them to.

The Minimum Wage Floor

Even without any reimbursement policy, there is a federal floor. Under the FLSA’s “kickback” rule, wages are not considered paid “free and clear” if an employee kicks back part of them to the employer through required expenses.³ The Department of Labor applies that logic to employees required to use personal vehicles: if gas, insurance, and wear-and-tear costs eat into your paycheck enough to drop your effective hourly pay below minimum wage in any workweek, your employer has violated the FLSA.⁴

Michigan’s minimum wage is $13.73 per hour as of January 1, 2026, nearly double the federal $7.25 floor.⁵ The higher state rate is the one that governs. A delivery driver earning $15 an hour with heavy vehicle expenses has a thin cushion before crossing the line. A salaried employee at $25 an hour who occasionally drives to a client meeting almost certainly won’t.

When a Written Policy Becomes Enforceable

Michigan’s Payment of Wages and Fringe Benefits Act (MCL 408.471 et seq.) is the statute that gives most employees their real leverage. The Act doesn’t create a right to mileage reimbursement on its own. What it does is turn an employer’s written promises into enforceable obligations. The Act defines “fringe benefits” as compensation owed under a written contract or written policy, and the definition explicitly includes “authorized expenses incurred during the course of employment.”⁶

If your employee handbook, offer letter, or union contract says the company reimburses mileage at a specific rate, the employer must pay it on the terms in that document. Employers sometimes roll out a reimbursement policy, then quietly stop paying or cut the rate without updating the written policy. Under the Act, the written terms control. An employer who fails to pay fringe benefits as written is guilty of a misdemeanor, and one who acts with intent to defraud faces a fine of up to $1,000, up to a year in jail, or both.⁶ The state can also assess a separate civil penalty of up to $1,000 and order payment of back wages.

If nothing in writing promises reimbursement, the Act gives you no claim. Verbal assurances from a manager generally don’t qualify. That is why the first document to check is the handbook or the offer letter.

The 2026 IRS Rate and How Employers Set Their Own

The IRS set the 2026 standard business mileage rate at 72.5 cents per mile, up from 70 cents in 2025.¹ Medical driving and qualifying military moves are reimbursed at 20.5 cents per mile. The IRS updates these annually based on an independent study of fixed and variable vehicle operating costs.

Michigan employers are free to set their own rate. Some pay a flat per-mile amount below the IRS rate, some pay above it, and some use a Fixed and Variable Rate (FAVR) plan that separates reimbursement into a periodic fixed payment for costs like insurance and depreciation and a variable payment for gas and maintenance tied to actual miles. Reimbursing below the IRS rate is not automatically unfair. An employee driving a paid-off economy car in a low-cost area genuinely costs less per mile than someone driving a new truck through Detroit. The IRS rate is a nationwide average, not a promise of what your vehicle actually costs to operate. Rates well below the standard rate deserve harder questions, particularly for employees who drive frequently.

What Counts as Reimbursable Driving

The basic line is straightforward. Driving from one work location to another during the workday is business mileage. Driving from home to your regular workplace is a commute, and commuting costs are never reimbursable or deductible, no matter how far you drive or whether you take business calls on the way.⁷ Reimbursable trips typically include travel between office locations, visits to clients or job sites, work errands, and driving to a temporary work location.

Remote and Hybrid Workers

The commuting line gets tricky if you split time between home and a corporate office. When your home office qualifies as your principal place of business, the IRS treats travel from home to another work location in the same trade or business as deductible transportation, not commuting.⁷ A remote employee whose primary workspace is home can have trips to the corporate office count as reimbursable business mileage, which is the opposite of what most people assume. If the corporate office is your regular workplace and home is just where you sometimes work, the drive between them is still a commute.

Temporary Work Locations

Travel to a temporary work location is generally reimbursable regardless of distance, as long as you have a regular place of business elsewhere. The IRS treats a work location as temporary if it is realistically expected to last one year or less.⁷ Once an assignment is expected to run longer than a year, that location becomes your new regular workplace and the daily drive becomes a nonreimbursable commute.

Records You Need to Keep

The IRS requires four elements to substantiate business mileage: the amount (miles driven or cost), the date of each trip, the destination, and the business purpose.⁸ A log that just lists total miles for the month won’t cut it. Each trip needs its own entry with enough detail to connect the driving to a work purpose. Digital mileage-tracking apps have largely replaced paper logs because they capture GPS data automatically.

Weak records aren’t just a reimbursement problem. If your employer runs an accountable plan (explained below), inadequate substantiation can cause your entire reimbursement to be reclassified as taxable wages.

How Mileage Reimbursement Is Taxed

Whether reimbursement lands in your pocket tax-free depends on whether your employer runs an “accountable plan.” An accountable plan has three requirements:

The expenses must relate to services you performed as an employee.
You must substantiate the expenses to your employer within a reasonable time.
You must return any reimbursement that exceeds your substantiated expenses within 120 days.

When all three are met, reimbursements at or below the IRS standard rate are not reported as income on your W-2, and you owe no tax on them. If your employer pays above the standard rate, only the excess is included in box 1 of your W-2 as taxable wages.⁹

If any of the three requirements fails, the entire reimbursement becomes a “nonaccountable plan” payment. The full amount shows up as taxable wages, subject to income tax withholding and payroll taxes.¹⁰ Employers sometimes drift into nonaccountable territory without realizing it, usually because they never require mileage logs or don’t enforce the return of excess payments. Ask how your plan is structured.

No Federal Deduction for Unreimbursed Mileage

If your employer refuses to reimburse and there’s no written policy to enforce, the federal tax code offers no relief. Before 2018, unreimbursed employee business expenses were deductible as miscellaneous itemized deductions subject to a 2% adjusted gross income floor. The Tax Cuts and Jobs Act suspended that deduction starting in 2018, and the One Big, Beautiful Bill Act of 2025 made the elimination permanent. There is no federal deduction for unreimbursed business mileage for W-2 employees in 2026.

A narrow exception exists for Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses, who may still claim certain work expenses as adjustments to income.¹¹ Independent contractors are a separate category entirely; they deduct vehicle costs on Schedule C, and the elimination of the employee deduction doesn’t touch them. For W-2 employees, your employer’s reimbursement policy is now the only way to recover driving costs.

Filing a Wage Complaint in Michigan

If your employer’s written policy or contract promises mileage reimbursement and the company stops paying, start internally. In union workplaces, the collective bargaining agreement will spell out a grievance process. For non-union employees, a written request to HR or management that quotes the specific policy language is the practical starting point.

When internal efforts fail, you can file a written complaint with the Michigan Department of Licensing and Regulatory Affairs. The deadline is 12 months from the date of the alleged violation.¹² LARA investigates wage and fringe benefit complaints and has authority to order payment of wages owed and assess civil penalties against the employer.⁶ You also have the option of filing a breach-of-contract lawsuit in Michigan court, where a judge can evaluate your employment agreement and award compensation for unreimbursed expenses. The 12-month LARA window is short enough that employees who wait too long can lose the administrative remedy even with a strong case.

1
Internal Revenue Service. Notice 2026-10 – 2026 Standard Mileage Rates
2
U.S. Department of Labor. WHD Opinion Letter FLSA2020-12
3
eCFR. 29 CFR Part 531 – Wage Payments Under the Fair Labor Standards Act of 1938
4
U.S. Department of Labor. Fact Sheet 16 – Deductions From Wages for Uniforms and Other Facilities Under the FLSA
5
Michigan LEO. Minimum Wage and Overtime
6
Michigan Legislature. Payment of Wages and Fringe Benefits Act 390 of 1978
7
Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses – Section: Transportation
8
eCFR. 26 CFR 1.274-5A – Substantiation Requirements
9
Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses – Section: Per Diem and Car Allowances
10
eCFR. 26 CFR 1.62-2 – Reimbursements and Other Expense Allowance Arrangements
11
Internal Revenue Service. Education and Work-Related Expenses
12
State of Michigan. Filing a Complaint for Non-payment of Wages or Fringe Benefits