The IRS has released the standard mileage rates that take effect at the start of the upcoming calendar year. As usual, the update is a mix of increases and decreases depending on the purpose of the driving, and it matters for both tax planning and workplace reimbursement practices.
The Standard Mileage Rates Beginning January 1
For travel in a personal vehicle, the IRS standard mileage rate for business driving is now 72.5 cents per mile (up 2.5 cents).
For medical mileage and qualified moving mileage, the rate is 20.5 cents per mile. Moving mileage remains limited to those who qualify under federal rules, including certain active-duty service members (down 0.5 cents).
For charitable driving, the rate remains 14 cents per mile because that amount is set by statute rather than adjusted annually.
These rates apply to all vehicle types, including electric and hybrid vehicles, as well as gasoline- and diesel-powered vehicles.
Why Employers Should Pay Attention, Especially in California
For California employers, the IRS update is not just a tax headline. California Labor Code section 2802 requires employers to reimburse employees for all necessary expenditures or losses incurred as a direct consequence of performing job duties. That includes business mileage when employees use their own vehicles for work-related travel.
Using the IRS Rate as a Safe Benchmark
Many employers use the IRS standard mileage rate as their default reimbursement amount because it is widely accepted as a reasonable estimate of the full cost of operating a vehicle. The full cost is broader than fuel alone and includes insurance, maintenance, repairs, and depreciation.
If an employer chooses to reimburse at a lower rate, the employer should be prepared to show that the lower rate still fully covers the employee’s actual work-related driving costs. A fuel card alone generally does not achieve that, because fuel is only one component of the overall expense.
Stipends and Auto Allowances: Helpful, but Not Always Clean
Some organizations provide a vehicle stipend or an auto allowance instead of reimbursing mileage on a per-trip basis. That can work, but it requires a disciplined approach.
Employees should be informed that any allowance that exceeds their actual business driving costs may be taxable. Employees should also be told that if the allowance does not cover their actual work mileage costs, they may request additional reimbursement. Without clear communication and documentation, stipends can create wage-and-hour risk, tax risk, or both.
Documentation Still Matters
Employees should maintain and, ideally, submit mileage records that support business use. Employers should also maintain a consistent process for tracking and paying reimbursements. Federal enforcement of vehicle allowances and documentation has become more active in recent years, particularly in cases where payments are made without supporting business-use records.
For any organization using stipends, hybrid reimbursement models, or nonstandard mileage rates, it is prudent to coordinate with a CPA or qualified tax professional to ensure the approach remains compliant and defensible.
The new IRS mileage rate increases the business reimbursement benchmark while slightly reducing the medical and qualified moving rate. Employers, particularly those operating in California, should treat the update as an opportunity to confirm that their reimbursement policies remain clear, compliant, and properly documented.