Nanny mileage reimbursement: a fair, tax-free way to cover the driving

Nanny mileage reimbursement is money a family pays a nanny for work miles driven in the nanny's own car. The usual benchmark is the IRS business rate: 72.5 cents a mile through June 30, 2026, and 76 cents from July 1. Paid against a mileage log at or below that rate, it stays out of taxable wages, and the nanny's commute to your home doesn't count.

What nanny mileage reimbursement is.

The IRS publishes both figures on its 2026 standard mileage rates page. That rate is a benchmark. No federal law requires you to pay it.

Here is why the conversation matters. Gas and tire wear add up when your nanny drives your kids around town. If no one talks about those costs, they quietly come out of your nanny's pay, and that is a pay cut nobody agreed to.

What counts, and what it costs.

Once a family decides to reimburse, two questions come up right away. Which miles count, and what rate applies to them?

The answers are simple. The rate changed partway through 2026, though, so the date of each trip matters.

Which miles count.

Work miles are the trips your nanny makes for your family during the shift. These usually include:

• School drop-off and pickup
• Driving to activities, lessons, and playdates
• Doctor and dentist appointments
• Errands for your household, like groceries or the pharmacy
• Any other driving between places while on the clock

The drive from your nanny's home to yours is different. IRS Publication 463 explains the IRS accountable plan rules and treats driving between home and your regular workplace as personal commuting, whatever the distance. The IRS doesn't address nannies by name, so excluding the commute is our application of that rule to your home as the workplace.

All of this assumes your nanny uses their own car. If they drive the family car, you already cover the gas and upkeep, so there are no miles to reimburse.

The 2026 IRS rate, and its mid-year change.

For 2026, the IRS business rate is 72.5 cents a mile for miles driven Jan. 1 to June 30. It is 76 cents a mile for miles driven July 1 to Dec. 31. In its mid-year rate announcement, the IRS said the change "results from recent increases in the price of fuel."

The new rate isn't retroactive. A school run in May uses 72.5 cents, and a school run in August uses 76 cents, even if you pay both in the same month. These figures are current as of October 2026, so check the IRS page each year for the latest rate.

This is the IRS standard rate for business use of a personal vehicle. It is also the benchmark for tax-free reimbursement, so it is a fair number to build your agreement around.

Here is a worked example. Say your nanny drives 40 work miles a week for 52 weeks, or 2,080 miles in 2026:

That is about $1,544 for the year. Without reimbursement, your nanny would cover it out of pocket.

Flat stipends, gas cards, and raises.

Some families would rather skip the log and pay a set amount. Each option trades convenience against taxes, and the tradeoffs land on both of you.

A flat allowance is easier to run. Without a log, though, your nanny pays tax on money that was only meant to cover their car.

Why a clear mileage policy is worth it.

A written mileage policy saves both of you money and awkward conversations later. Each of the reasons below builds on that one simple agreement.

It stays tax-free for both of you.

Under an accountable plan, the trips need a clear connection to the job. Your nanny accounts for the miles, and any extra money comes back, within a reasonable period. The IRS treats 60 days for accounting and 120 days for returning extra money as safe harbors for that period.

Meet those rules and the reimbursement stays out of wages. Under a nonaccountable plan, the IRS counts the entire amount as wages, and anything you pay above the IRS rate is wages too.

It fits your household employer paperwork.

The IRS household employer tax guide says Social Security and Medicare taxes apply once you pay a household worker $3,000 or more in cash wages in 2026. Keeping mileage on its own line, apart from wages, keeps your payroll records clean and easy to check.

It keeps you on the right side of state law.

No federal law requires you to pay the IRS rate. Some states do have general expense-reimbursement laws, and you should confirm whether yours applies to household employers.

California Legislative Information publishes California Labor Code 2802, which says an employer "shall indemnify his or her employee for all necessary expenditures." The Illinois General Assembly's Illinois expense reimbursement law requires reimbursing necessary expenditures, with employees submitting them "within 30 calendar days after incurring the expense." The Massachusetts Department of Labor Standards' Massachusetts travel time rules say employees directed to travel during the workday "shall be reimbursed for all transportation expenses."

None of these laws names nannies or mileage directly. Check your state's rules, and talk with a payroll professional or attorney before you treat any of them as settled for your household.

It answers the insurance question early.

If your nanny drives their own car, bring up insurance in the same talk as mileage. Your nanny should ask their insurer whether work driving changes their coverage.

If your nanny drives the family car instead, no mileage applies. Ask your insurer whether your nanny's work driving changes your coverage before the first school run.

It builds trust from day one.

Fair reimbursement tells your nanny you see them as a professional. On Gathered Hands, nannies set their own rates and keep all of it, and paying for work miles protects that pay.

How to set up nanny mileage reimbursement.

On Gathered Hands, families and nannies set terms directly, with no agency in between. That means you write the mileage clause together, in four steps.

1. Agree in writing. Add a clause to your nanny agreement, such as: "Family reimburses work miles at the current IRS business rate, paid each payroll against a mileage log. Commuting is excluded, and the rate adjusts when the IRS changes it."
2. Keep a log. For each trip, record the date, the purpose or destination, the start and end odometer readings, and the total miles. A shared spreadsheet works, and so does a notebook in the glove box.
3. Submit and calculate each pay period. Multiply the miles by the rate in effect on the date driven. With weekly or biweekly payroll, settling up each time stays well within the IRS 60-day safe harbor for a reasonable accounting period.
4. Pay it as its own line. List mileage separately from wages on each pay stub or payment. Keep the logs and payment records with your household employer files.

Once the clause is signed, the system mostly runs itself. Your nanny logs the miles and you pay them, so nobody has to bring it up again.

The goal is a nanny who never pays to do their job.

When work miles are logged and reimbursed at the IRS rate under a written agreement, your nanny keeps every dollar they earn. You keep clean records and a relationship built on fair terms.

This approach suits families who hire directly and nannies who want fair terms from the start. Get started on Gathered Hands, where families can find a nanny directly and agree on mileage before day one. Nannies can create your nanny profile on Gathered Hands and list mileage reimbursement as part of their terms.