If your nanny uses their own car for the job — school runs, activities, errands, the pediatrician — you should reimburse them for it. Handled correctly, mileage reimbursement is tax-free: it doesn't count as wages for your nanny and doesn't add to your payroll taxes. Here's how to do it right.

What you're reimbursing (and what you're not)

You reimburse work miles — driving your nanny does for the job: taking your kids to school, to activities, to appointments, or running household errands you asked for. You do not reimburse their commute to and from your home; that's personal, like any employee's drive to work.

This only applies when your nanny drives their OWN car. If they drive your family car, there's nothing to reimburse — you're already covering the gas and upkeep.

Use the IRS standard mileage rate

The clean way to reimburse is the IRS standard mileage rate — a per-mile figure the IRS sets each year that bundles gas, wear-and-tear, insurance, and depreciation into one number (it was 70¢ per mile for 2025; check the current year's rate). Multiply the rate by the work miles driven. Reimburse at or below that rate and the payment is tax-free.

Pay MORE than the standard rate and the excess becomes taxable wages. Stick at or under the IRS rate to keep the whole reimbursement tax-free.

Keep a simple record

Tax-free treatment depends on this being a real reimbursement of documented business miles — what the IRS calls an 'accountable plan.' You don't need anything fancy:

  • A running log of dates, destinations, and miles (a phone note or shared sheet is fine).
  • The rate you're using and the total reimbursed each period.
  • Payment shown separately from wages — not folded into the hourly pay.
Show the reimbursement as its own line, separate from gross pay, on the pay stub. That keeps it clearly out of taxable wages and makes year-end totals clean.

A common alternative

Some families front a gas card or a fixed monthly car allowance instead. Be careful: a flat allowance that isn't tied to documented miles can be treated as taxable wages. The mileage-rate method is the simplest way to stay tax-free.

House lets you add a separate, non-taxable mileage line to each pay stub so it never inflates wages or payroll taxes.

Add mileage to a pay run

The bottom line

Reimburse work miles at the IRS standard rate, keep a simple log, and show it separately from wages. Your nanny is made whole for driving your kids around, and neither of you pays a cent of extra tax on it.