On December 29, 2022, the Internal Revenue Service issued the 2023 optional standard mileage rates, which are used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on January 1, 2023, the standard mileage rates for the use of a vehicle (car, van, pickup or panel trucks that is electric, hybrid-electric, gasoline or diesel-powered) will be:
- 65.5 cents per mile driven for business use, up 3 cents from the midyear increase in 2022.
- 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022.
- 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022.
The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
Under California Labor Code section 2802, employers must fully reimburse employees for all expenses actually and necessarily incurred — which includes reimbursing employees for required use of their personal vehicle. Expense reimbursement for personal vehicle use, however, is not limited to just gas — it also includes wear and tear, repair, oil, insurance and other costs associated with vehicle use and maintenance.
While using the IRS mileage reimbursement rate is optional, many employers typically choose to do so — and both the California courts and the California Division of Labor Standards Enforcement have stated that, absent evidence to the contrary, using the IRS mileage rate will generally satisfy an employer’s obligation to reimburse for business-related personal vehicle expenses.
As part of their January 1 compliance plan, employers should ensure that their expense reimbursement policies are updated to reflect the new, higher IRS mileage rate.