The IRS has announced an increase to the optional standard mileage rate for business use of a personal vehicle, raising the rate to 76 cents per mile for business travel beginning July 1, 2026. Business mileage incurred during the first six months of 2026 should continue to be calculated using the prior 72.5-cent-per-mile rate.
This rate applies to cars, SUVs, vans, pickups, and panel trucks, regardless of whether they are powered by gasoline, diesel, hybrid, or electric technology.
Why the Rate Changed
The IRS periodically reviews the cost of operating a vehicle and adjusts the standard mileage rate when warranted. However, the standard mileage rate is calculated based on all the costs involved in driving a vehicle — not just the price of gas.
It’s based on an annual study commissioned by the IRS about the fixed and variable costs of operating a vehicle, including gas, maintenance, repairs and depreciation. Occasionally, if there’s a substantial change in average gas prices, the IRS will change the cents-per-mile rate midyear.
Although fuel prices often receive the most attention, they represent only one component of the overall mileage calculation.
Standard Mileage vs. Actual Expenses
Businesses generally have two methods for deducting or reimbursing vehicle expenses:
Standard Mileage Method
- Reimburse business travel at 76 cents per mile
- Simplifies recordkeeping
- Eliminates the need to track every vehicle expense
Actual Expense Method
- Deduct actual operating costs, including fuel, maintenance, insurance, repairs, and depreciation
- May provide a larger deduction in some situations but requires substantially more documentation
Choosing the right method depends on the circumstances and IRS eligibility requirements.
Documentation Still Matters
Even when using the standard mileage rate, employees should maintain contemporaneous mileage records that include the date of each trip, business purpose, starting location, and destination. And the number of business miles driven.
Accurate documentation is one of the key requirements for maintaining the tax-free status of mileage reimbursements.
Review Your Policies
As you can see, there are many factors to consider in deciding whether to use the standard mileage rate to deduct vehicle expenses.
Employers should review their mileage reimbursement policies, expense reporting procedures, and payroll practices to ensure they reflect the split-year 2026 IRS business mileage rates: 72.5 cents per mile for business travel from January 1 through June 30, 2026, and 76 cents per mile for business travel beginning July 1, 2026. Organizations should also verify that their reimbursement program meets the requirements of an IRS accountable plan.
Medical Mileage Reminder: The IRS also increased the standard mileage rate for medical travel for the second half of 2026. Mileage driven for qualified medical purposes is 20.5 cents per mile from January 1 through June 30, 2026, and 23.5 cents per mile beginning July 1, 2026. The charitable mileage rate remains unchanged at 14 cents per mile.
If you have questions about the new mileage rate, accountable plans, or employee expense reimbursements, contact Machen McChesney. Our team can help you stay compliant while ensuring your reimbursement practices remain both efficient and tax-advantaged.
For more information on the above article or any accounting & outsourcing services, contact Amber Cochran Saxon at (334) 321-4729 or by leaving us a message below.
