The IRS has announced a rare mid-year increase to the standard mileage reimbursement rates due to rising fuel costs. Although the announcement was made on July 13, 2026, the new rates are retroactive to July 1, 2026, creating an important compliance issue for employers.
Effective July 1 to December 31, 2026
The updated IRS standard mileage reimbursement rates are:
- 76¢ per mile for business travel (up from 72.5¢)
- 23.5¢ per mile for medical travel
- 23.5¢ per mile for qualified military moving expenses
- 14¢ per mile for charitable service (unchanged)
The rates apply to all vehicle types, including gasoline, diesel, hybrid, and fully electric vehicles.
Why California Employers Should Pay Attention
For California employers, this isn’t just an IRS update, it’s a potential wage and hour compliance issue.
California law requires employers to reimburse employees for all necessary business expenses incurred while performing their jobs. The California Division of Labor Standards Enforcement (DLSE) has long recognized that using the IRS standard mileage rate will generally satisfy an employer’s reimbursement obligation, unless an employee can demonstrate that their actual business vehicle expenses were higher.
If your organization reimburses employees for business mileage, now is the time to review your practices.
Action Items for Employers
JorgensenHR recommends that employers take the following steps immediately:
- Update your expense reimbursement policy to reflect the new IRS mileage rate effective July 1.
- Review reimbursements paid between July 1 and July 13. Because the IRS announcement came after the effective date, employees who were reimbursed at the old rate may be owed additional reimbursement.
- Communicate the change to managers, payroll, finance, and employees who submit mileage expenses.
- Verify payroll and expense management systems have been updated to avoid underpayments going forward.
Don’t Let a Small Oversight Become a Bigger Problem
Mileage reimbursement errors may seem minor, but they can create unnecessary employee relations issues and expose employers to California wage and hour claims.
JorgensenHR helps employers stay ahead of compliance changes by reviewing policies, auditing HR practices, and ensuring payroll and reimbursement procedures align with current federal and California requirements.
Need assistance reviewing your mileage reimbursement policy or other California HR compliance requirements? Contact JorgensenHR today. Our experienced HR consultants help employers minimize risk, maximize compliance, and stay focused on running their business, not chasing changing regulations.
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