IRS Issues RETROACTIVE Employee Mileage Reimbursement Rate

by Jennifer Kaiser

Breaking News: Gas Is Expensive

Yesterday, the IRS retroactively increased the optional standard mileage reimbursement rates due to rising fuel prices. Effective July 1, 2026, the rates have changed as follows:

  • Business: 76¢ per mile (up from 72.5 cents per mile)
  • Medical and Moving: 23.5¢ per mile (up from 20.5 cents per mile)

If you’ve already reimbursed employees for July business mileage using the old rate, you will need to issue additional reimbursement.

For California employers, this is more than just an accounting update. California law generally requires employers to reimburse employees for all necessary business expenses, including the reasonable cost of using a personal vehicle for work. While you aren’t required to use the IRS safe harbor mileage rate, it’s still the easiest method of getting reimbursement right without asking employees how much they paid for gas, tires, oil changes, and that mysterious dashboard light

The good news? This is a fairly easy compliance fix.

The bad news? The IRS still can’t do anything about the price of gas.

Here is the link to IRS Annoucement 2026-11 if you’re the type who actually enjoys reading IRS publications (we won’t judge).