California Mileage Reimbursement in 2025: What Employers and Workers Should Understand

When someone uses their own car for work in California, they should be paid back for the costs involved. Gas, maintenance, and general wear and tear aren’t free, and the state has rules to make sure those expenses aren’t placed on the employee. For 2025, some updates deserve attention—especially for businesses and workers who rely on travel. As part of its commitment to helping both employers and workers stay on the right side of the law, Nakase Law Firm Inc. offers guidance on California mileage reimbursement and related issues.

The Law Behind Mileage Pay in California

In California, there’s a clear legal requirement that workers be paid back for any costs they take on while doing their job. That includes mileage when someone uses their own car for business purposes. The state’s Labor Code Section 2802 says employers must cover all costs tied directly to the work being done. Most companies use a standard rate to keep things manageable. They could ask for receipts or calculate exact expenses, but using a per-mile rate is far easier and often seen as fair. That’s where the IRS rate comes in, and many California businesses choose to go with it to avoid complications. California Business Lawyer & Corporate Lawyer Inc. has worked with many clients on handling California mileage reimbursement in 2025, especially when figuring out what counts as complete compensation.

What’s the IRS Rate in 2025

Starting January 1, 2025, the standard IRS rate is 67 cents per mile. This number gets reviewed yearly and takes gas prices, repair costs, and inflation into account. While California doesn’t require employers to use this exact figure, paying anything lower carries a risk. If it doesn’t fully cover the worker’s cost, there could be legal consequences.

Companies that choose a different method must be able to prove that it fairly covers the cost of vehicle use.

Jobs Where Mileage Matters the Most

Some professions depend heavily on personal vehicles, which means mileage payments are a regular part of compensation. Some examples include:

• Real estate professionals traveling between listings and clients
• Home healthcare staff making house visits
• Sales reps meeting customers across different locations
• Delivery workers using their own vehicles
• Social service employees conducting field visits

In these roles, reimbursed miles often translate into several hundred dollars a month. Without that pay, workers would be stuck covering their own costs for job-related travel.

How Companies Can Track and Pay Mileage the Right Way

To avoid errors, companies should put a process in place for tracking and reimbursing mileage. Here are a few steps that help:

1. Require workers to record all business-related trips, with dates, start and end locations, and purpose.
2. Use mileage tracking apps to simplify recordkeeping.
3. Make payments on a regular schedule so workers aren’t waiting too long to be reimbursed.
4. Write down the company’s approach to reimbursement to eliminate confusion.

Mileage and Remote Work in 2025

Remote work has shifted how people travel for their jobs. Many now ask whether trips from home to a meeting or event should be paid back. In California, it depends on whether the trip is part of the job.

If a remote worker is asked to meet a client or attend a company event, that’s reimbursable. A routine trip from home to an assigned office, however, is usually not.

Problems with Flat Payments

To simplify things, some employers give a fixed amount each month instead of calculating mileage. While that may seem convenient, it can cause trouble. If the amount doesn’t fully cover actual expenses, it might fall short of what California law requires.

Businesses that use this approach need to either:

• Pay based on the IRS rate and collect mileage logs, or
• Keep proof that the flat payment covers a typical amount of job-related travel

Without support, the flat rate could be questioned.

What Can Go Wrong Without Proper Reimbursement

If a company fails to follow the rules on mileage pay, it could face:

• Complaints under wage and labor laws
• Financial penalties
• Legal action from multiple workers at once
• Government orders to repay affected workers

These issues are often the result of poor communication or lack of structure.

Why Records Matter So Much

Both workers and businesses should hold onto their mileage records. For businesses, this means keeping logs of all payments and storing travel reports. For employees, it means keeping a personal log of their miles and copies of submitted claims.

Best practices include:

• Saving mileage records for a minimum of four years
• Using tracking tools for easier log management
• Checking records regularly to catch errors early

Good documentation reduces the chance of disputes.

How Car Allowances Compare

Some companies offer a monthly allowance instead of paying per mile. These payments don’t depend on actual distance driven. Here’s how the two methods differ:

Mileage-based pay is often safer because it reflects real use and avoids unexpected tax questions.

What About Taxes in 2025

For this year, payments at or below the IRS rate are not taxed as income. This helps both employers and workers avoid added paperwork and reporting.

When payments go over the IRS rate, the extra amount might be taxed unless the employee can prove the extra miles or costs. Car allowances, unless documented properly, can also be seen as regular income. To be safe, workers should consider checking with a tax advisor.

Common Company Slip-Ups

Mistakes in mileage reimbursement are common and include:

• Using outdated mileage rates
• Giving fixed amounts without reviewing cost accuracy
• Only paying for gas and ignoring other travel costs
• Not covering required travel for remote workers
• Skipping written guidelines on how reimbursement works

These oversights can lead to bigger problems later if they aren’t corrected.

Steps for Employees if They Aren’t Reimbursed

If a worker believes they weren’t paid back properly, the best course of action is:

1. Share concerns with management or HR clearly and calmly
2. Submit logs of business travel and a formal request
3. Document everything
4. Reach out to a labor attorney if the matter isn’t resolved

The law supports workers in these cases, and claims can often include retroactive pay.

Final Thoughts

Mileage reimbursement is an important part of doing business in California. In 2025, the rates may have changed, but the principle hasn’t. If someone uses their car for work, they should not have to pay out of pocket.

By using the IRS rate, keeping proper logs, and avoiding shortcuts, both workers and employers can stay clear of disputes. The key is to stay informed and handle reimbursement with care.