California Mileage Reimbursement in 2025: A Complete Guide
Emily Maina
Last update on:
January 3, 2025 4:39 AM
Published on:
Attention California employers! On December 19th, the IRS released the 2025 federal mileage rates, featuring a 3-cent increase for business use to 70 cents per mile. Many businesses in California use these rates to reimburse employees for work-related driving, helping cover rising vehicle costs. Make sure to update your reimbursement policies to align with the new rates and ensure your team is fairly compensated in 2025.
It’s important for businesses who employ traveling workers to understand how to reimburse for mileage. Whether you employ salespeople, delivery drivers, or construction workers working at different job sites, miles can add up quickly.
This guide will cover everything you need to know about California mileage reimbursement, including California Labor Code 2802, current mileage rates, and how to calculate reimbursement.
Don’t let the California Mileage Reimbursement Law catch you off guard.
Talk to our experts to learn how to stay compliant and save money.
According to the California Labor Code section 2802, employers should compensate employees for "all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.”
Employers who do not adhere to California reimbursement regulations are subject to legal consequences.
California’s strict labor regulations are designed to protect workers from having to foot the bill for work-related expenses.
For instance, if you send a staff member to pick up supplies, you are required by law to pay them back for the items they purchased as well as the mileage they accrued while driving their personal vehicle.
Below are examples of work-related travel expenses that are eligible for reimbursement:
Driving to meet with clients
Making deliveries to customers
Traveling from one work site to the next
Providing home healthcare services
Making trips to financial institutions for work-related tasks
Besides travel expenses, California Labor Code Section 2802 requires employers to reimburse employees for additional work-related expenses such as:
Work uniform costs
Training costs
Fees for participating in conferences
Cell phone bills for work phones
Toll costs incurred during work-related travel
Meet IRS reporting requirements for tax-free reimbursements
Employee mileage reimbursement is tax-free for employers in California. However, this rule applies as long as your company’s mileage rate is not more than the current standard mileage rate issued by the IRS. As of 2025, the IRS mileage rate for business related travel is 70 cents per mile.
If your reimbursement rate is less than or equal to the IRS mileage rate, any reimbursement that is issued to employees is fully deductible.
The IRS requires that all mileage claims be substantiated by providing proof that travel was strictly business related. To meet IRS reporting standards, an accurate mileage log of trip details such as, travel date, departure location and destination, total trip mileage, and trip purpose must be kept by drivers.
In the past, trip details were recorded on paper or entered into Excel spreadsheets. Now, more companies are turning to the best mileage-tracking apps to automate their mileage tracking processes.
However, if you prefer to use manual mileage logs, our free mileage log template will help your business meet IRS reporting requirements.
California companies can use four methods to determine reimbursement totals. Per the Gattuso v. Harte-Hanks Shoppers case, the California Supreme Court determined that these methods are compliant with Labor Code 2802.
Approved Reimbursement Calculation Methods:
Business Mileage Reimbursement
Actual Expense Method
Lump-Sum Method
The FAVR method
Let’s look at each of the methods in detail to help you determine which option is the best for your business.
Business Mileage Reimbursement
The Business Mileage Reimbursement method requires employees to log all work-related mileage that will be compensated by the employer. Employers should reimburse workers at or near the standard IRS mileage rate to avoid legal repercussions.
Cons: This method relies on the accuracy of reported mileage which can be misrepresented by employees who wish to claim a higher deduction.
This calculation method requires employees to record the exact expenses incurred while using their personal vehicles for work-related purposes. These costs may include fuel purchases, vehicle depreciation, and maintenance work. Although this method is the most accurate, it tends to be the most time-consuming for employees.
Cons: Disputes may arise over what expenses are constituted as reasonable and necessary according to California Labor Code 2802 (ex: choice of auto mechanic or grade of fuel purchased)
Lump Sum Method
The lump sum method requires employers to pay their employees a fixed monthly amount in the form of a “gas stipend” or per diem payment, to cover costs associated with using personal vehicles for business purposes. Employees are not required to keep mileage records in order to receive compensation with this method.
Cons: Employers must fully compensate employees for the actual costs associated with operating a vehicle or they may violate state laws. Additionally, gas prices tend to fluctuate which can make the value of lump sum payments inadequate.
The FAVR Method: Fixed and Variable Rate Allowance
The FAVR method categorizes work-related vehicle costs as either fixed or variable expenses according to local rates. This method figures local insurance rates and gas prices into employee compensation to reflect actual and current costs.
Note: Any allowance issued under the FAVR method is considered tax-free as long as the company complies with IRS reporting standards.
Cons: This method may be difficult to implement without advice from an accountant or financial consultant.
Use Timeero to stay compliant with California’s reimbursement laws
Timeero accurately tracks mileage for work and provides precise IRS-compliant mileage logs. The app’s robust features make it easy to comply with California's mileage reimbursement requirements.
Let’s look at a few of Timeero’s features that will help your company remain compliant with federal and state reimbursement laws.
GPS powered time and mileage tracking
Tracking employees throughout their workday while enforcing your company’s mileage policy can be difficult. Timeero tracks employee location and mileage in real-time to help your company produce accurate mileage reports.
Mileage tracking on Timeero.
Timeero automatically begins tracking employees once they clock in. The app begins tracking mileage once the employee’s speed of movement exceeds 4.47 mph. This ensures that time spent in traffic or walking is not counted toward business mileage.
Personalize tracking settings on Timeero.
Timeero continues to record mileage offline when employees are in locations with sporadic network access. The app’s offline tracking feature stores employee time and location records locally until internet connection is restored.
Timeero values employee privacy and only tracks workers’ time and location while they are on the clock. The app can send push notifications to employees in the event they forget to clock out.
Timeero’s Who's Working dashboard displays workers’ locations in real-time. This feature allows you to easily verify the whereabouts of your employees throughout the workday and encourages employee accountability.
Timeero’s Who’s Working dashboard.
Segmented tracking
Timeero's Segmented Tracking feature provides detailed insights into an employee’s workday. Perfect for drivers who make multiple stops, Segmented Tracking divides the employee’s driving route into individual chunks based on the stops taken.
Workers only need to clock in once at the start of their shift and Segmented Tracking will document travel details such as, trip date, departure location and destination, total miles traveled, driving speed, and job assignments.
Segmented Tracking provides detailed insights into your employees whereabouts.
Commuter mileage
Timeero’s "Commuter Mileage" feature simplifies mileage classification for businesses. We cover this more in detail in our article on commuting mileage reimbursement.
Timeero takes into account your employees' commuting distances when you assign job destinations to them. When an employee reaches the commute threshold, the software starts recording business mileage automatically. This guarantees that the mileage reported is solely associated with travel for work-related purposes.
Once the rate is configured, the software automatically computes the total reimbursement amount.
Customizing cost per mile on Timeero.
Additional expenses
Timeero allows businesses to track extra charges independently, enabling them to control every aspect of mileage reimbursement. Timeero allows employees to attach notes and receipts to individual timesheets documenting expenses incurred during travel.
For example, if an employee uploaded a receipt for parking fees associated with a client meeting, admins or managers can examine the added notes and approve the claim for reimbursement.
Employees can add notes and attach photos to time cards.
Route replay
Take a closer look at your employees’ driving routes with Timeero’s Route Replay. This tool pins location markers (breadcrumbs) on a virtual map that can be maximized to display timestamps and driving speed at particular points along an employee’s path.
Together, individual breadcrumbs trace an employee’s driving route that can be replayed to show deviations from assigned routes, increasing employee accountability and mileage accuracy.
Timeero’s Breadcrumb feature.
Electronic signatures
Use Timeero’s Electronic Signatures feature to hold your staff accountable. Employees can digitally sign time sheets verifying task completion and hours worked. Clients also have the ability to sign employee timesheets verifying a worker was present at the job site that day.
Adding a mobile signature (Employee view).
Suggested route
To encourage accountability, safe driving and time management skills, Timeero’s Suggested Route feature compares the recommended driving route against the actual route taken.
This tool allows you to quickly spot instances where drivers veered away from the shortest driving route and incurred additional mileage expenses.
Timeero’s Suggested Route feature.
Historical records
A detailed historical record that shows an employee’s complete trip history and mileage details addresses disputes associated with claims of underpayment and prevents lawsuits.
Timeero’s timesheet details can be used to solve payment disputes. Information such as clock in/out times, miles traveled during the shift, breaks, and overtime hours are included on timesheets.
Timeero’s employee timesheets.
You can also generate specific reports, such as mileage reports, which come in handy when proving that you are compliant with California Labor Code 2802. This information is securely stored for four years in the event you need to access reports and documents.
Mileage reports on Timeero.
Integrations
Timeero easily integrates with several payroll software options. By automating the transfer of mileage data recorded in Timeero to your payroll software, you eliminate the risk of mistakes that lead to inaccurate mileage reimbursements.
Popular payroll integrations include: Zapier, Vieventium, Gusto, Rippling, Paychex, Xero, Paylocity, and ADP.
Timeero integrations.
Simplify California mileage reimbursement with Timeero
Complying with California Mileage Reimbursement laws requires effort on your part. Be aware of any updates to legal regulations and incorporate one of the best tracking apps among your workforce to remain compliant.
Timeero’s automatic reimbursement calculator makes compensating employees for work related travel an accurate and painless process.
FAQs
What is California’s mileage reimbursement rate in 2025?
Employers have the flexibility to choose a reimbursement rate, but most choose to adhere to the standard mileage rates established by the IRS for business-driven miles. This rate is adjusted annually to reflect fluctuations in fuel costs and other operational expenses.
Emily Maina is a tech-savvy writer with a passion for creating content. With years of experience in the industry, she is well-versed in the latest trends and developments in the tech industry. When she’s not working, Emily enjoys exploring the great outdoors or watching her favorite shows.
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