Mileage Reimbursement Policy: Complete Guide + Free Template for Canadian & US Businesses (2026)
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If your business has employees who drive for work — visiting clients, travelling between sites, or making deliveries — you need a clear mileage reimbursement policy. Without one, you risk overpaying inflated claims, failing CRA or IRS audits, creating employee disputes, and leaving your company exposed to tax liability.
This guide gives you everything you need: what a mileage reimbursement policy must include, the 2026 CRA and IRS rates, what trips qualify, how to prevent reimbursement fraud, a free policy template you can adapt today, and how to automate the whole process with Fuelshine.
What Is a Mileage Reimbursement Policy?
A mileage reimbursement policy is a formal written document that defines the rules for paying employees back when they use their personal vehicles for work. It answers four core questions: who qualifies, what trips are covered, what rate will be paid, and how claims must be submitted and approved.
Without a policy, employees guess what to submit and managers guess what to approve. The result is inconsistent reimbursements, ballooning costs, and audit risk.
2026 Mileage Reimbursement Rates: CRA and IRS
Before writing your policy, you need to know the current government-set rates. These rates define the maximum you can reimburse tax-free.
CRA Mileage Rate 2026 (Canada)
The Canada Revenue Agency has set the following automobile allowance rates for 2026:
73 cents per kilometre for the first 5,000 km of business driving
67 cents per kilometre after 5,000 km
An additional 4 cents per km for drivers in the Northwest Territories, Yukon, and Nunavut
Reimbursements at or below this rate are non-taxable to the employee. If you reimburse above this rate, the excess is considered a taxable benefit.
IRS Mileage Rate 2026 (United States)
The IRS standard mileage rate for 2026 is 72.5 cents per mile for business use of a personal vehicle, up 2.5 cents from 2025. Reimbursements at or below this rate are fully tax-free for employees and fully deductible for employers. Reimbursements above this rate are treated as taxable income.
What Business Trips Qualify for Mileage Reimbursement?
Your policy must clearly define what counts as a reimbursable trip. The following trips generally qualify:
Travel between two business locations or work sites
Driving to visit clients, customers, or prospects
Trips to pick up business supplies or equipment
Travel to training, conferences, or professional development
Driving to a temporary work location (not your regular office)
The following trips do NOT qualify and must be explicitly excluded in your policy:
Regular daily commute between home and the office
Personal errands run during the workday
Travel for personal purposes, even if in a company vehicle
7 Essential Components of a Mileage Reimbursement Policy
Whether you are writing your first mileage reimbursement policy or updating an existing one, every strong policy covers these seven components:
1. Eligibility
Define which employees are eligible. Is it all staff who drive for work, or only specific roles such as sales, field service, or delivery? Be explicit about whether contractors and part-time workers are included.
2. Reimbursement Rate
State clearly whether you are using the CRA standard rate (73 cents/km in Canada for 2026), the IRS rate (72.5 cents/mile in the US), or a custom company rate. If you use a rate above the government standard, specify that the excess will be treated as taxable income.
3. Mileage Tracking Requirements
Specify how employees must log their mileage. At minimum, every trip record must include the date, start and end location, business purpose, and total kilometres or miles driven. Specify whether a GPS-verified app (such as Fuelshine) is required, or whether manual logs are acceptable. GPS-verified logs are far more defensible in a CRA or IRS audit.
4. Submission Process and Deadlines
Outline when and how employees must submit mileage claims. Common options include monthly, bi-weekly, or per payroll cycle. Specify the submission method (mileage app export, email, expense system) and include a hard deadline such as the 5th of the following month. Claims submitted after the deadline may not be processed until the next cycle.
5. Approval Workflow
Identify who approves mileage claims and what the turnaround time is. Typically this is a direct manager or finance team member. Define what happens if a claim is disputed or if a trip looks anomalous. Automated tools like Fuelshine can flag suspicious claims before they reach a manager, reducing approval time from hours to minutes.
6. Record Retention
Both the CRA and IRS require businesses to retain mileage records for a minimum of 6 years (CRA) or 3 years from the date the return was filed (IRS). Your policy should state how long records must be kept and where they are stored. Cloud-based mileage tracking apps like Fuelshine retain all records automatically.
7. Fraud Prevention and Consequences
Studies show that mileage claims are inflated by an average of 39% when tracked manually. Your policy should state that fraudulent or inflated claims are a disciplinary matter and outline the consequences. Using GPS-verified mileage data eliminates the ambiguity that makes fraud possible in the first place.
Free Mileage Reimbursement Policy Template (2026)
Use the template below as a starting point. Customize the fields in brackets to match your company name, rate, and processes.
[Company Name] Mileage Reimbursement Policy — Effective January 1, 2026
Purpose: This policy establishes rules for reimbursing employees who use personal vehicles for approved business travel on behalf of [Company Name].
Eligible Employees: All full-time and part-time employees who use personal vehicles for business travel, as pre-approved by their manager.
Reimbursement Rate: Canada — [CRA rate] per km for the first 5,000 km; [CRA rate minus 4 cents] thereafter. United States — IRS standard mileage rate [IRS rate] per mile
Eligible Trips: Client meetings, site visits, inter-office travel, and other pre-approved business trips. Excludes commuting between home and regular workplace.
Submission Process: Employees must submit mileage claims within [X] days of the trip using [Fuelshine / expense system]. Each submission must include date, origin, destination, business purpose, and total distance.
Approval: Claims are reviewed and approved by [Manager/Finance Team] within [X] business days. Approved claims are processed in the next payroll cycle.
Record Retention: All mileage records must be retained for a minimum of 6 years (Canada) or 3 years from the filing date (US). Records are stored in [Fuelshine / cloud system].
Non-Compliance: Falsifying mileage claims is grounds for disciplinary action up to and including termination. [Company Name] reserves the right to audit all claims.
Frequently Asked Questions: Mileage Reimbursement Policy
Is mileage reimbursement mandatory in Canada?
No, mileage reimbursement is not legislatively mandated in Canada, but the CRA sets guidelines for tax-free reimbursement rates. If employees are not reimbursed, they may be able to deduct vehicle expenses on their personal tax return using Form T777. Most employers choose to reimburse to remain competitive and compliant.
What is the 2025 CRA mileage rate?
For 2025, the CRA mileage rate is 72 cents per kilometre for the first 5,000 km driven for business purposes, and 66 cents per kilometre for each additional km. These rates apply to employees across all provinces except the Northwest Territories, Yukon, and Nunavut, which have higher rates.
Can I reimburse employees above the CRA rate?
Yes. You can reimburse above the CRA rate, but the excess amount is considered a taxable benefit to the employee and must be included in their T4 slip. For example, if the CRA rate is $0.72/km and you pay $0.85/km, the $0.13/km difference is taxable income.
Do I need a mileage log if I use a GPS app?
Yes, GPS-based mileage logs are accepted by both the CRA and IRS, provided they capture the required information: date, origin, destination, distance, and business purpose. Apps like Fuelshine automatically capture this data via GPS and generate compliant reports, eliminating the need for manual logbooks.
What happens if an employee loses their mileage log?
If an employee loses a manual mileage log, they may face rejected reimbursement claims and potential tax issues if audited. Cloud-based apps like Fuelshine store all trip data automatically and securely in the cloud, so records can never be lost. Employers should require GPS-tracked logs to protect both the company and employee in case of an audit.
Build a Mileage Reimbursement Policy That Works in 2026
A well-written mileage reimbursement policy protects your business from tax exposure, reduces fraud, and ensures employees are treated fairly. Use the template in this guide as a starting point, update the rates annually, and back it up with a GPS mileage tracking solution like Fuelshine to automate the entire process — from trip capture to reimbursement report.
Whether you are a small business in Canada or a growing US enterprise, getting your mileage reimbursement policy right in 2026 means fewer disputes, cleaner audits, and a happier workforce. Start with the right tools and the right policy today.
