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IRS Increases Mileage Rate For 2023 – Employee Benefits & Compensation

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On January 1, 2023, the IRS mileage rate
increased to 65.5 cents per mile for driving done for business
purposes. This is a three (3) cent increase from the rate set for
the second half of 2022. According to the IRS, this rate applies
“to electric and hybrid-electric automobiles, as well as
gasoline and diesel-powered vehicles” and was calculated
“based on an annual study of the fixed and variable costs of
operating an automobile.”

As a reminder, California Labor Code section 2802(a) requires
employers to reimburse employees “for all necessary
expenditures or losses incurred…in direct consequence of the
discharge of [their] duties…” Employees operating their
vehicles for business purposes trigger expense reimbursement
obligations under California Labor Code section 2802(a). Failure to
reimburse business expenses can give rise to lawsuits which may
result in significant penalties and attorneys’ fees.

Employers should ensure they are updating their policies and
practices to reflect reimbursement of the new mileage rate in order
to avoid costly consequences down the line. While the IRS mileage
rate is deemed reasonable by the Division of Labor Standards
Enforcement (DLSE), this is not the only permissible way to
reimburse vehicle-related business expenses in California, as long
as employees are being fully reimbursed for their expenses.
Employers are encouraged to reach out for assistance in updating
their expense reimbursement policies and practices.

IRS Increases Mileage Rate For 2023

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