As part of your nanny’s job, they take your kids to parks, playgrounds, museums, playdates, and other places to get out and about. Your children may also have music lessons, sports practices, or school pick-ups and drop-offs that your nanny must handle as well. Maybe they also do some grocery shopping and other errands on your behalf.
While federal law does not require you to reimburse your employees for mileage, in some states like California; Illinois; Massachusetts; and Washington, D.C. it is legally required to reimburse your employee for the miles they drive in their own vehicle while on the job.
Even outside of those states, it’s a best practice to pay your nanny for mileage based on the IRS standard rate.
Your nanny’s commute to and from your home doesn’t count toward their mileage reimbursement.
On Dec. 19, 2024, the IRS announced the 2025 optional standard mileage rates, which are used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
The 2025 standard mileage rates for the use of a car, van, pickup or panel truck will be:
- 70 cents per mile driven for business use, up 3 cents from the rate for 2024;
- 21 cents per mile driven for medical purposes or for moving purposes for qualified active-duty members of the Armed Forces, the same as the rate for 2024; and
- 14 cents per mile driven in service of charitable organizations. The rate is set by statute and remains unchanged from 2024.
The rates apply to fully electric and hybrid automobiles, as well as gasoline and diesel-powered vehicles.
Under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses, nor can they claim a deduction for moving expenses unless they are active duty Armed Forces members moving under orders to a permanent change of station.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Taxpayers using the standard mileage rate for a vehicle they own must use the rate in the first year the automobile is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. For leased vehicles, the standard mileage rate method must be used for the entire lease period (including renewals) if the standard mileage rate is chosen.
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