As we welcome 2025, a noteworthy change is coming for those who drive for work: the IRS mileage reimbursement rate increases to 70 cents per mile on January 1, 2025. This is a three-cent increase from the 2024 rate of 67 cents per mile, providing a bit of extra relief to offset the rising costs of vehicle use.
Let’s break down what this means for nannies, household staff, and their employers.
The New Mileage Rate
The IRS mileage reimbursement rate of 70 cents per mile is designed to cover costs associated with work-related vehicle use, such as:
- Fuel
- Maintenance and repairs
- Wear and tear
- Personal insurance costs
This rate does not include additional costs like a business use rider or higher liability limits. Importantly, mileage reimbursements are non-taxable and are a common standard for compensating nannies and staff who drive for work.
Who Does This Apply To?
This updated rate is applicable to nannies and household staff who use their personal vehicles for work-related purposes, including:
- Transporting children to and from school or activities
- Running errands for the family
It’s important to distinguish between commuting (driving from home to work) and work-related travel (any driving done as part of the job). Mileage reimbursement applies only to the latter.
How Employers Should Handle Reimbursements
To ensure fair and accurate reimbursements, families and employers should:
- Track mileage: Use apps like MileIQ or TripLog to log miles driven for work.
- Calculate accurately: Multiply the total work-related miles driven by the IRS mileage rate.
- Pay promptly: Include reimbursements in the nanny’s regular pay cycle.
Benefits of Mileage Reimbursement
Mileage reimbursement offers several advantages:
- Tax-free benefit: Nannies receive this compensation without it being taxed.
- Improved job satisfaction: Demonstrating fairness in covering work-related expenses can enhance trust and retention.
Offering mileage reimbursement is a small yet impactful way to show appreciation for your nanny’s dedication.
Comparison to Other Forms of Compensation
Mileage reimbursement is different from providing a work vehicle or a gas stipend. While stipends or cars offer convenience, they don’t directly adjust to fluctuating costs like the IRS mileage rate does.
Potential Tax Deductions
If mileage is not reimbursed, it may be possible for nannies or employers to claim these expenses as deductions. However, tax rules can be complex, so it’s wise to consult a tax professional for personalized advice.
Best Practices for Record Keeping
Accurate record-keeping is crucial. Use this simple template to log mileage:
- Date of trip
- Purpose of trip (e.g., school drop-off, grocery run)
- Starting mileage
- Ending mileage
- Total miles driven
Consistency in tracking ensures transparency and avoids disputes.
Frequently Asked Questions
- “Can a nanny be reimbursed for commuting mileage?” No, commuting expenses are not covered under the IRS mileage reimbursement guidelines.
- “Is mileage reimbursement mandatory?” While not legally required, it is considered industry standard and a best practice.
- “What if the family provides a car?” If a family provides a car for work purposes, mileage reimbursement typically does not apply.
Families: If you’re unsure how to handle mileage reimbursement or other aspects of nanny compensation, reach out to our agency for tailored guidance.
Nannies: Make sure you’re informed about your rights and discuss reimbursement policies with your employer at the start of the job.
Together, we can ensure fair practices that benefit everyone involved. Let’s hit the road in 2025 with clarity and confidence!