The IRS Just Changed The Number Your Mileage Reimbursement Depends On

Many California employers assume mileage reimbursement is a nice-to-have, something to adjust once a year if at all, as long as the number is in the right neighborhood. That assumption is comfortable. It is also wrong.

The IRS just raised its business standard mileage rate to 76 cents per mile for July 1 through December 31, 2026, up from 72.5 cents, an unusually rare midyear change driven by fuel prices. An employer still reimbursing at the old rate, or at a flat monthly stipend nobody has revisited since last year, is quietly falling short of what California law actually requires.

Under Lab. Code § 2802, employers must indemnify employees for necessary expenditures incurred in doing their job, including the cost of using a personal vehicle for work. The IRS rate is not the legal standard itself. It is one accepted method of satisfying it, recognized in Gattuso v. Harte-Hanks Shoppers, Inc. An employer can reimburse a different way, actual expense tracking, for example, but whatever method is used has to actually cover what driving for the job costs the employee.

The failure pattern is administrative, not malicious. Payroll updates the rate once, HR forgets to flag the midyear change, and six months later an audit or a departing employee’s demand letter surfaces the gap. Fixing it going forward is simple. Fixing it retroactively, across every affected employee and pay period, is not.

Whether your current reimbursement method still satisfies § 2802 after this rate change depends on how you calculate it and how long it has been since anyone checked.

If your reimbursement rate or method has not been reviewed since before July 1, that gap is worth closing now rather than after someone raises it. Contact Michael Trust Law, APC for a no-charge initial consultation. The facts determine what needs to be addressed — and how much of a conversation that takes.

This post shares general information based on common patterns I see in California workplaces. It is not legal advice, does not create an attorney-client relationship, and outcomes depend on specific facts — no lawyer can guarantee a result. Past results do not guarantee or predict future outcomes. AI may have been used to create this post. All content reviewed by a CA attorney before publication.