IRS Raises Business Mileage Rate for 2026

Understanding the Standard Mileage Rate

The standard mileage rate is a crucial figure for individuals and businesses determining the deductible costs associated with operating vehicles for various purposes. These purposes include business activities, charitable donations, medical appointments, and relocation expenses for active duty military personnel.

2026 Mileage Rates

• Business Use: 72.5 cents per mile (up from 70 cents in 2025)
• Medical Purposes: 20.5 cents per mile (down from 21 cents in 2025)
• Moving Expenses (Active Duty Military): 20.5 cents per mile (down from 21 cents in 2025)
• Charitable Organizations: 14 cents per mile (unchanged from 2025)

These rates apply uniformly to all vehicle types, including gasoline, diesel, electric, and hybrid models.

Rate Determination

The business mileage rate is established annually through a comprehensive study conducted by the IRS, analyzing both fixed and variable operating costs. Conversely, the rates for medical and moving purposes are calculated based solely on variable costs.

Tax Considerations

The One Big Beautiful Bill Act has permanently eliminated the deductibility of unreimbursed employee travel expenses for the vast majority of taxpayers. Additionally, the deduction for moving expenses is now restricted primarily to active-duty military personnel moving under orders and members of the U.S. intelligence community.

Using the Standard Mileage Rate

For self-employed individuals and specifically exempted employees, the standard mileage rate remains an optional and convenient method for calculating vehicle deductions. While these taxpayers have the flexibility to choose between the standard rate and tracking actual expenses, they must opt into the mileage rate during the vehicle’s first year of business use to maintain that choice in future years. However, under the One Big Beautiful Bill Act, the majority of W-2 employees are no longer eligible to deduct these expenses in any form.

Key Considerations for Taxpayers

• Business Use: If a vehicle is used for business purposes in the first year of ownership, taxpayers must either utilize the standard mileage rate from the outset or opt for tracking actual expenses.
• Leased Vehicles: When using a leased vehicle, the standard mileage rate must be employed consistently throughout the entire lease term, including any renewal periods.

Notice 2026-10

This official IRS notice provides detailed information on the 2026 standard mileage rates, including guidance on:

• Fixed and Variable Rate (FAVR) plans: Maximum automobile costs for calculating mileage reimbursement allowances.
• Employer-provided automobiles: Maximum fair market value for calculating mileage allowances using cents-per-mile or fleet-average-valuation rules.

FAVR Allowance for 2026

For purposes of the fixed and variable rate (FAVR) allowance, the maximum standard automobile cost for vehicles places in service after 2026 is:

• $61,700 for passenger automobiles, and
• $61,700 for trucks and vans.

Employers can use a FAVR allowance to reimburse employees who use their own vehicles for the employer’s business.

Vehicle Deduction Compliance and Strategy

The IRS’s adjustment to the standard mileage rate for business use in 2026 provides valuable guidance for taxpayers seeking to accurately determine and deduct vehicle-related expenses. By carefully considering their individual circumstances and consulting with a qualified tax professional if needed, taxpayers can ensure compliance with IRS regulations and maximize potential tax benefits.

Disclaimer: This article provides general information and should not be considered professional financial or tax advice. Please consult with a qualified CPA or financial advisor for guidance specific to your individual business needs.