• The IRS sets mileage reimbursement rates for three different categories of vehicles.im auto image by Andreas Garkuscha from Fotolia.com
  
  Mileage reimbursement rates compensate an employee or contractor for the depreciation incurred by a vehicle operated for business, medical, moving or charitable reasons. The federal government determines a standard per-mile reimbursement rate each year, although actual rates paid by employers to employees can vary among states and organizations. While there is no federal law that limits the amount of mileage reimbursement an employer can pay to an employee, most reimbursement rates in the private sector are closely in line with the federal standard.
  
  

Standard Mileage Rate

• By law, the Internal Revenue Service (IRS) determines the standard mileage rate yearly. The reimbursement rate is a means of offsetting the cost of owning or leasing and operating vehicles used only for business, charitable contribution, moving and medical expenses.
  
  If a company or individual uses a borrowed, rented or otherwise for-hire vehicle for business purposes, mileage incurred by those vehicles is not eligible for reimbursement under federal tax regulations. However, this rule does not apply to vehicles leased by a company for business purposes.
  
  

Qualifying Vehicles

• The IRS determines separate mileage reimbursement rates for vehicles that fall within one of three categories: business, medical and moving activities and charitable contribution. Mileage reimbursement rates for business activity generally are much higher than medical, moving and charitable rates. In addition to reimbursement allowances for mileage, the IRS allows reimbursement or deduction for expenses such as parking fees, tolls, interest and taxes, depending upon circumstances.
  
  

Reimbursement Payment

• The IRS allows mileage reimbursement to be paid in few different ways. Reimbursees can receive fixed and variable periodic payments, called FAVR payments, which provide mileage reimbursement in payments over a period of time. Another option is periodic fixed payment, which is paid in installments at least quarterly. A third variation, periodic quarterly payment, is paid at least quarterly but relies on different factors to determine specific reimbursement frequency.