California’s 2025 mileage rate outlines IRS reimbursement rules, employer responsibilities, and proper methods for employee compensation. Avoid legal risk by using updated mileage rates, setting clear travel rules, and paying staff fairly for work-related driving.
By Brad Nakase, Attorney
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More than 1.3 million business trips are made daily, and up to 448 million are made every year. That’s a significant amount of ground and kilometers traveled.
Employees should receive mileage reimbursement whether they are traveling by train, automobile, or airplane.
However, what is the precise amount of mileage reimbursement that employees are eligible for?
To assist you and your staff, this article will go over the laws, rules, and guidelines pertaining to California mileage reimbursement.
According to T&E (travel and expense) policies, the following are some of the most frequent types of travel:
Pro-tips
IRS mileage rates vary every year and depend on national averages. Fuel, maintenance, repair, insurance, & depreciation costs are all taken into account by the IRS. The DLSE (Division of Labor Standards Enforcement) considers the rates appropriate; however, they are simply estimates.
State law determines the cost per mile. The CA mileage rate in 2025 is broken down here:
Employers must substantiate these arguments if they decide to pay workers less than whatever the IRS recommends. Companies are required to demonstrate that the employee’s real expenses and vehicle condition are lower than the federal average.
Employees are subject to the same regulations. Employees must additionally demonstrate that their car running costs are greater if they believe their expenses exceed the IRS rate.
Because it safeguards both companies and employees, the mileage reimbursement approach is the most widely used. Paying staff the IRS level or more is in your best interest. Ignoring this could lead to unwelcome litigation that might be hard to win.
It is your responsibility to demonstrate that your employees’ expenses were lower than the national average, for instance, if you pay them 50 cents a mile rather than the suggested 58 cents, and they file a claim. This would be very difficult to accomplish and wouldn’t be worth the 8-cent savings, your time, or your effort.
1. Method of actual expenses
The real expense technique is keeping track of the precise costs an employee incurs when using their own vehicle. Fuel, repairs, upkeep, insurance, upkeep, depreciation, and registration expenses are among the expenses.
Employees can use a tool to determine their precise expenditures, and employers are in charge of dividing those costs between work-related and personal travel expenses. This method of calculating mileage reimbursement is the most precise, but it is also the most costly and time-consuming.
2. Lump-sum method
Employers who adopt the lump-sum reimbursement approach provide workers with a set payment in exchange for using their own vehicles. Since employees are not obliged to keep track of their precise mileage, this is the best situation for them. Rather, workers get a per diem salary in the shape of a gas stipend or a car allowance.
This approach’s sole requirement is that the employer & employee concur that the set price includes all incurred costs. If applicable, employers are also in charge of recording additional reimbursement amounts, such as labor and business expenses.
It is your responsibility as the decision-maker to decide how you wish to refund mileage, along with other business expenses. A lot of company owners decide to include mileage reimbursement in a worker’s regular salary. This gives workers a thorough pay stub for keeping records and helps preserve all the documents in one location.
Some choose to pay using a separate check or direct deposit in order to maintain a clear separation of these two accounting records. To prevent misunderstandings or inconsistencies, you should ideally pay employees within 2 weeks of them turning in their mileage logs, regardless of the approach you take.
In addition to keeping you in compliance with local and federal regulations, providing employees with mileage reimbursement as per the CA mileage rate in 2025 increases business. Here’s how:
Your company needs to be aware of the nuances of the CA mileage rate in 2025 in order to stay out of legal hot water.
Gattuso vs. Harte Hanks Shoppers, a well-known court decision, provided business owners with three options for rewarding their employees and helped clarify California’s mileage reimbursement regulations.
Current IRS regulations and financial knowledge are used to calculate California mileage reimbursement. Create a thorough mileage reimbursement policy with intelligence to safeguard both your staff and yourself and ensure adherence to the CA mileage rate in 2025.
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