California Mileage Reimbursement Forecast 2024

Introduction

Organizations with employees who drive to work using their vehicles must have a way to compensate them for the expenses incurred during this business travel. Which state your employees work in impacts how mileage reimbursement is handled.

As each state has its own legislation surrounding business expenses, it’s essential to thoroughly understand the relevant regional rules and federal guidelines and regulations. For companies located in California or with employees who work in California, being aware of Califonia-specific mileage reimbursement rules is critical to ensure compliant and accurate reimbursement for business travel. 

Update, December 14th 2023: the IRS has announced their new 2024 mileage rates.

• Business use is 67¢ per mile, up from 65.5¢ in 2023.
• Medical or moving purposes: 21 cents per mile.
• Service of charitable organizations: unchanged at 14 cents per mile.

The maximum standard vehicle cost allowance for FAVR and fleet programs has also been announced.

• The maximum standard vehicle cost is The maximum standard automobile cost for 2024 is $62,000. This is up from $60,800 in 2023.

See our full article and announcement of the 2024 IRS rate:

IRS Announces 2024 Mileage Rates (67¢) | Cardata

Mileage Reimbursement In California

It’s legally required in California for companies to reimburse business mileage for their employees as of 2023. Not all states require reimbursement for business mileage, making California an employee-friendly state for work travel and helping to ensure proper business expense compensation. According to California Labor Code Section 2802(a), employers must reimburse their employees for reasonable and necessary expenses to perform job-related duties. [1]

As of 2023, the standard mileage rate set by the IRS is 65.5 cents per mile. However, there are also different rates for charitable organizations and qualified active-duty Armed Forces members traveling for medical or moving purposes. The standard mileage rate for business use can include driving to meetings, site visits, and other work travel as stipulated by the IRS. Note that the IRS does not consider commuting from a home residence to the workplace a business expense. [2]

The IRS standard rate is the maximum amount that can be reimbursed to drivers tax-free, assuming other regulations are followed and detailed recordkeeping is performed. Companies can choose to reimburse their employees above the IRS standard rate, but any reimbursement amount beyond the IRS standard rate may be subject to income tax.

What’s On The Horizon For Drivers

As discussed above, California does not set its own state-wide mileage rate, and drivers follow the IRS-set standard rate. It’s expected that the IRS will set a new rate in early 2024, and it’s vital for employees and employers to keep an eye out for the established rate to understand how to reimburse business mileage adequately. 

The IRS standard rate typically increases or decreases by a few cents, and it’s expected to shift slightly in 2024. Standard mileage rates are usually updated and published yearly, although sometimes they are updated more frequently.

As long as payments don’t exceed the current IRS standard rate and any other relevant requirements are followed, reimbursements can be tax-free.

Beyond expected changes to the IRS standard rate, regulations can change at any time. Both employee drivers and employers need to stay aware of any upcoming changes so they can adjust their vehicle reimbursement program accordingly. 

What This Means For Employees And Employers

For employers with employees who need to drive for work, reimbursement is essential in California. To help ensure compliance with legislation, employers can benefit by setting up a vehicle reimbursement program that accurately tracks all business expenses and reimburses employees accordingly. 

Within the context of work travel, this includes tracking all business mileage using a mileage log, a spreadsheet, or a mileage tracking app. Important mileage information must be followed to justify these business expenses to the IRS, including trip dates, miles traveled, destination, and more details.

It’s worthwhile for businesses to examine the options available for reimbursement, such as fixed and variable rate (FAVR) reimbursement programs. These programs consider different business expenses, allowing them to provide a more accurate representation often.

Beyond simply reimbursements for business mileage, FAVR programs consider other costs from business use of a personal vehicle, including insurance, depreciation, maintenance, and more. Compared to other vehicle reimbursement programs like lump sum allowances and Cents per Mile programs, FAVR is more location-specific by accounting for geographic disparities in reimbursements for varying regional expenses. 

For drivers with employees across different states, it’s essential to be aware of the legislation in each region in which drivers work. Know that regional differences exist in insurance rates, fuel prices, etc. Providing your employees with a region-specific reimbursement plan helps make sure that reimbursements truly reflect actual expenses. 

For example, Californians often pay higher-than-average gas prices than other areas in the United States. FAVR can help ensure that payments more accurately represent business expenses. Having business expenses correctly accounted for isn’t just essential in California; it can also help improve employee morale and retention. [3]

Beyond mileage rates, it’s also important for employees and employers to follow any other regulations specific to their vehicle reimbursement program. For example, FAVR reimbursement programs have minimum mileage requirements, car eligibility rules, and more important laws to be aware of.

The Benefit Of Vehicle Reimbursement Software

Vehicle reimbursement software can save companies the time and effort to manage vehicle reimbursement programs. Additionally, they can help companies maintain compliance by providing the necessary tools. Cardata offers a mileage app that benefits employee drivers by providing automatic mileage tracking and cloud-based software to help administrators quickly manage drivers, approve business mileage, and submit reimbursements. 

Experts like Cardata are also designed to assist with region-specific regulations. Partnering with a company specializing in vehicle reimbursement can help you stay up-to-date on any changes in rules and provide the tools needed to track the required information, which can help promote compliance. For example, Cardata offers GPS-powered automatic mileage tracking to encourage accuracy, robust reporting tools to understand your vehicle reimbursement program, support with insurance compliance, and other beneficial services designed to streamline vehicle reimbursement programs. 

Beyond helping to promote compliance, vehicle reimbursement software can help by reducing the administrative burden of managing a vehicle reimbursement program internally. With shifting regulations and detailed data gathering required, vehicle reimbursement programs can be complex, and software can help by simplifying and streamlining processes. 

It’s important to note that vehicle reimbursements can be tax-free when IRS regulations and other rules are complied with. This benefits employees and employers, helping reduce the overall tax burden and promoting program efficiency.

What’s more, robust and easy-to-use vehicle reimbursement software can substantially benefit employee drivers, which could help attract new talent and retain existing employees. 

Conclusion: How Will Your Business Prepare?

Businesses with employee drivers in California need to stay on top of any regulation changes. This is important to help ensure compliance with state and federal laws and to help maximize the tax benefits associated with accountable vehicle reimbursement programs. 

In California, reimbursement for business expenses is mandatory. With that in mind, employers are best served by having a robust system to track and reimburse all work-related expenses from personal car use. To prepare for and stay on top of any legislative changes, businesses must evaluate all available options to help make their vehicle reimbursement programs more efficient and promote compliance.

Vehicle reimbursement software like Cardata can be an excellent way for companies to help maintain compliance with any regional and federal regulations. In addition to compliance, vehicle reimbursement software can significantly reduce the administrative burden of a vehicle reimbursement program, saving employees significant time and hassle.

Mileage reimbursement is an evolving landscape, and it’s essential to remain informed to proactively adapt to any changes in legislation in California in 2024.

Sources

[1] IRS Standard Mileage Rate 2023 | Internal Revenue Service 

[2] Section 2802 | California Legislative Information  

[3] State Gas Price Average | AAA 

Disclaimer: Nothing in this blog post is legal, accounting, or insurance advice. Consult your lawyer, accountant, or insurance agent, and do not rely on the information contained herein for any business or personal financial or legal decision-making. While we strive to be as reliable as possible, we are neither lawyers, accountants, or agents. For several citations of IRS publications on which we base our blog content ideas, please always consult this article: https://www.cardata.co/blog/irs-rules-for-mileage-reimbursements. For Cardata’s terms of service, go here: https://www.cardata.co/terms.