How do I reimburse my nanny for mileage and gas in 2026?
Updated November 6, 2026 · For 2026 · General information, not tax or legal advice
When your nanny drives the kids in their own car, you should cover the cost, and if you do it the right way the reimbursement is tax-free to them and not wages for you.
The 2026 rate
The IRS standard mileage rate changed mid-year:
- 72.5 cents per mile for January 1 through June 30, 2026
- 76 cents per mile for July 1 through December 31, 2026
The rate is meant to cover gas, maintenance, insurance and depreciation. You can reimburse less; anything up to the rate is tax-free with records.
Accountable plan rules
To keep reimbursements out of wages:
- The driving must be for your household (school runs, activities, errands you asked for). Commuting to and from your home is not reimbursable.
- The nanny substantiates it: date, miles and purpose, within a reasonable time. A simple log or a note on the time sheet is enough.
- Any advance beyond the actual amount is returned.
Pay it separately from wages and show it on the stub as a reimbursement. It does not count toward the $3,000 threshold, is not subject to Social Security or Medicare, and does not appear in W-2 wages.
Gas, tolls and parking
Tolls and parking are reimbursed at actual cost on top of the mileage rate. Gas is already inside the mileage rate; do not reimburse both for the same trip. If you prefer a flat gas allowance for a nanny who drives a lot, that is fine, but a flat allowance paid regardless of miles is wages unless it is reconciled to actual mileage.
Your car instead
If the nanny drives your car, there is nothing to reimburse. Make sure your auto policy lists them as a permitted or named driver; many insurers require it for a regular driver who is not a household member.
State rules
California, Illinois, Massachusetts, Montana, New Hampshire and a few other states require employers to reimburse necessary business expenses, which includes a nanny's required driving. Elsewhere it is contractual, but the minimum-wage floor still applies: unreimbursed costs cannot push effective pay below minimum wage.
CareTab logs mileage and tolls on each day's time entry, applies the correct rate for the date, and keeps the reimbursement off the taxable lines of the stub.
Frequently asked
What is the IRS mileage rate for 2026?
72.5 cents per mile for January 1 through June 30, 2026, and 76 cents per mile for July 1 through December 31, 2026.
Is mileage reimbursement taxable to my nanny?
Not if it is paid under an accountable plan: the nanny records the miles and purpose, you reimburse at or below the IRS rate, and any excess advance is returned. Reimbursement above the rate, or without records, is wages.
Do I have to reimburse at all?
Federal law does not require it unless unreimbursed costs drop the nanny below minimum wage. California, Illinois, Massachusetts and a few other states require reimbursement of necessary expenses.
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