IRS Standard Mileage Rates Set to Increase in 2025
On December 19, 2024, the Internal Revenue Service (“IRS”) issued updated standard mileage rates for businesses to use for calculating the costs incurred by employees when driving a car for business purposes. Beginning January 1, 2025, the standard mileage rate will increase to 70 cents per mile, up from 67 cents in 2024.
As a reminder, under California Labor Code section 2802, employers are responsible for fully reimbursing employees for all expenses actually and necessarily incurred in performing their job duties. This includes reimbursing employees for the required use of their personal vehicle, including gas, wear and tear, repair, oil, insurance, and other associated costs. Using the IRS standard mileage rate in calculating reimbursements should fulfill an employer’s obligation to reimburse for business-related personal vehicle expenses, unless an employee can show that rate does not actually cover all of their expenses.
However, the use of the IRS standard mileage rate is optional, and other reimbursement methods can be utilized. For example, employees always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Additionally, the California Supreme Court has held that an employer can reimburse for vehicle expenses via a lump-sum payment. Employers should be warned however that if they utilize the IRS mileage rate or a lump-sum payment, and the employee can show that the chosen method does not cover all actual expenses incurred, the employer will be liable for the difference.
In getting ready for the new year, you should update your expense reimbursement policies with the new IRS mileage rate.
If you have any questions about the matters discussed in this issue of Compliance Matters, please call your firm contact at (818) 508-3700 or visit us online at www.brgslaw.com .
From all of us at BRGS, wishing all of you a happy and healthy new year!
Sincerely,