Mileage reimbursement is not a nice-to-have in case your employees drive to work in California. It’s the law. Yet it’s one of those topics that continues to perplex, cause awkward conversations, and compliance risks for businesses.
What is the amount of money you should reimburse per mile? What trips actually count? And what should you do when you are wrong?
California is serious about reimbursing employees for expenses. In contrast to most states, employers in this state are legally obligated to cover the costs of conducting business, including mileage. As rates will fluctuate in 2026 and the enforcement will be stricter, it is high time to reconsider your approach.
In this blog, you will have a clear idea of the California mileage reimbursement rate in 2026. Plus, know about the laws governing it, and their compatibility with the federal regulations.
What Is California’s Business Mileage Reimbursement Rate?
The California business mileage reimbursement rate will increase to 72.5 cents per mile, effective January 1, 2026, up from 70 cents in 2025.
This is the rate that is in line with the IRS standard mileage rate and is a common benchmark among employers. The mileage rate is not only meant to cover fuel.
- Vehicle wear and tear
- Fuel costs
- Insurance
- Maintenance and repairs
- Depreciation
In brief, it represents the actual price of a personal vehicle to work.
This reimbursement is predictable and fair as perceived by an employee. To an employer, it brings about consistency and defensibility. Trust is enhanced when the rate is known by the employees in advance. The standard rate is a rate that enables audits to be easier when finance teams apply it.
In California, this rate of paying much less can easily become a legal and employee relations issue, especially when you are operating in California.
What Is Reimbursable Mileage in California?
It is good to answer this simple question that many teams can hardly answer before delving into laws. How many miles really matter?
In California, reimbursable mileage usually covers all the driving expenses that are necessary and reasonable, provided that the driving is necessary to carry out some work.
Common examples include:
- Coming out of the office to a client location.
- Commuting between various places of work in a day.
- Getting to meetings, conferences, or training.
- Making work-related errands.
Normal commuting is what does not normally count. Traveling to a normal office place at home is usually not covered.
With that said, the California law examines necessity. If an employee does not have an office, some commuting, such as travel, may be considered.
In case of vague policies, employees make guesses. Mistakes occur when the employees make guesses. Definitions in your mileage policy allow everybody to be on the same page and save time and effort in the future.
What Does California Law Say About Mileage Reimbursement?
The California laws on mileage reimbursement are based on a single concept. When an employee uses their own money to perform their duties, they are entitled to be reimbursed by the employer.
Mileage reimbursement California is in line with this principle since commuting to work places employees with real money. Gas prices fluctuate. Maintenance adds up. Insurance is not optional.
The law of California provides that employers are obligated to reimburse employees the expenses incurred in carrying out business travels, although the employer may not have a formal policy regarding reimbursement.
This obligation applies to:
- Full-time employees
- Part-time employees
- Hourly workers
- Salaried workers
It is also applicable irrespective of the frequency of the employee’s driving. A single business trip does count.
Lack of proper reimbursement may result in wage claims, penalties, interest, and, in certain instances, class-action suits. That is why the majority of employers in California consider mileage reimbursement as a compliance matter, rather than an HR procedure.
What Are the Critical Provisions of Labor Code 2802?
The California mileage reimbursement 2026 relies on Labor Code Section 2802. Although the language of the law is thick, the purpose is not.
The following is what it involves in practice.
- Employers must reimburse necessary expenses: If an employee incurs an expense as a direct result of doing their job, the employer must reimburse it. Mileage is a classic example.
- Reimbursement must be timely: Delaying reimbursement can be treated the same as not reimbursing at all. Late payments can trigger penalties.
- Employees cannot waive this right: Even if an employee agrees not to submit mileage, that agreement does not override the law.
- Partial reimbursement is not enough: Paying less than the actual cost can still be a violation. This is why using the IRS-aligned rate is common. It helps demonstrate fairness.
Section 2802 is employee-friendly by design. Courts often interpret it broadly. From a business perspective, the safest approach is to assume that necessary mileage must be reimbursed fully and consistently.
How’s California Mileage Reimbursement Laws Different From Federal Laws?
This is where many multi-state companies get tripped up.
At the federal level, there is no general law requiring employers to reimburse mileage. The IRS mileage rate exists mainly for tax purposes. Employers can choose to use it, but they are not forced to.
California law mandates reimbursement for necessary business expenses. That means even if federal law is silent, California law still applies.
Key differences include:
- Federal law focuses on tax treatment
- California law focuses on employee protection
- Federal reimbursement is optional
- California reimbursement is mandatory
If you manage employees across multiple states, this difference matters. Applying a one-size-fits-all policy can expose your California operations to risk. Many employers solve this by having a California-specific addendum to their expense policy.
Common Mistakes Employers Make
Mileage reimbursement issues often come from small oversights.
These common mistakes include:
- Using outdated mileage rates
- Reimbursing fuel only instead of per mile
- Asking employees to “absorb” short trips
- Failing to reimburse mileage for salaried employees
- Relying on manual spreadsheets
Each of these can create compliance gaps. Over time, small gaps become big problems.
The fix usually starts with better systems, clearer policies, and less manual work.
How to Build a California-Compliant Mileage Policy?
A good mileage policy does two things. It protects your company and makes life easier for employees.
Here’s what a strong California mileage policy usually includes:
- The current reimbursement rate
- What counts as reimbursable mileage
- How and when mileage should be submitted
- Expected timelines for reimbursement
- Tools used for tracking and approval
Keep the language simple. Avoid legal jargon. When employees understand the policy, compliance improves naturally.
It also helps to review your policy every year. Rates change. Laws evolve. A quick annual update can prevent long-term issues.
Manage Mileage and Stay Compliant with Itilite
Managing mileage reimbursement in California doesn’t have to feel like a compliance headache. With itilite, employees can submit mileage in real time, straight from their phones.
Finance teams get clean, accurate data synced directly with expense reports, no spreadsheets, no rework, no surprises. When reimbursement rates change, the system updates automatically. When audits come up, your records are already in place.
What you get is simple:
- Faster reimbursements for employees
- Fewer disputes and follow-ups for finance
- Built-in compliance with California mileage rules
- Clear visibility into travel spend
Most importantly, itilite turns a regulatory requirement into a smooth, predictable process. You spend less time fixing errors and more time focusing on the business.
If your mileage process still feels manual or reactive, that’s a risk you don’t need to carry. In California, accuracy isn’t optional. Automation is how you stay ahead.
Book a demo with itilite and take the friction out of mileage and expense management.
