2026 IRS Mileage Rate Announced!

Many employers use the IRS standard mileage rate to reimburse employees for business travel when using their personal vehicle (and for good reason—more on that below). On December 29, the IRS announced that the standard mileage rate for business travel is increasing to 72.5 cents per mile on January 1, 2026, up from 70 cents in 2025.

The IRS also announced the following 2026 rates for other purposes:

• 5 cents per mile driven for medical or moving purposes for qualified active-duty members of the armed forces.
• 14 cents per mile driven in the service of charitable organizations.

These rates apply to electric and hybrid-electric automobiles, as well as gasoline- and diesel-powered vehicles.

Can’t We Just Reimburse Cost of Gas?

That isn’t the best idea. California Labor Code section 2802 requires employers to reimburse employees for all reasonable and necessary business expenses, such as the use of a personal vehicle for business travel. Importantly, California’s Labor Commissioner has found that employees should be reimbursed not only for the cost of gas, but also the cost of maintaining insurance, wear and tear on the vehicle, etc. The Labor Commissioner has determined that using the IRS mileage rate is “reasonable” for complying with California law, because it takes these additional factors into account.

If you choose to use a different reimbursement method, the burden is on you to prove that it sufficiently covers all reasonable and necessary costs.

For this reason, we encourage employers to use the standard mileage rate to pay tax-free reimbursements to employees who use their own vehicles for business as an alternative to tracking actual costs for operating an automobile for business use.

When Must We Reimburse for Business Travel?

Employers should reimburse all employees (both exempt and non-exempt) for mileage when they use their personal vehicle for work purposes, beyond their normal commute. This includes:

• When an employee is required to report to a work site other than their regular site. In that case, you should reimburse mileage for travel in excess of the employee’s normal commute to their regular site.
  • For example, if an employee typically travels 15 miles to their regular worksite, but you are requiring them to travel to a client site that is 30 miles away from their home, you should reimburse them for the extra 15 miles.
• Once the workday has started, reimburse mileage for all travel between work sites or other locations, except for their regular commute home.
• Be sure to also reimburse employees for required travel to attend an out-of-town business meeting, training session, or any other event.

Noteworthy: the California legislature seems to be paying closer attention to this issue. This year, SB 809, confirmed the employer’s duty to reimburse employees for the use of a vehicle owned by an employee and used by that employee in the discharge of their duties.

And don’t forget: you must also separately compensate non-exempt employees for their time during business travel beyond their commute. This is because required business travel is considered “hours worked” (i.e., on the clock time) and is compensable.

How Should We Prepare for 2026?

• Review your expense reimbursement policies.
• If you don’t already, consider using the IRS mileage rate for your employees’ business travel.

Notify your controller/bookkeeper or whoever facilitates your expense reimbursements of this new increase.