The Internal Revenue Service (IRS) has announced a midyear increase to the standard mileage rates for business, medical, and qualified moving expenses, effective July 1 through December 31, 2026. The adjustment, prompted by rising fuel prices, provides additional tax savings for businesses, self-employed individuals, and others who use their personal vehicles for qualifying purposes. Forbes and Thomson Reuters recently reported on this topic.
If you drive for business or reimburse employees for business travel, here’s what you need to know.
New IRS Standard Mileage Rates (July 1–December 31, 2026)
| Purpose | New Rate | Previous Rate |
|---|---|---|
| Business | 76¢ per mile | 72.5¢ per mile |
| Medical | 23.5¢ per mile | 20¢ per mile |
| Qualified Moving* | 23.5¢ per mile | 20¢ per mile |
| Charitable | 14¢ per mile | No change |
*Qualified moving expenses are deductible only for certain active-duty members of the U.S. Armed Forces and eligible members of the intelligence community.
*Qualified moving expenses are deductible only for certain active-duty members of the U.S. Armed Forces and eligible members of the intelligence community.
The updated mileage rates apply to all passenger vehicles, including gasoline-powered, diesel, hybrid, and fully electric vehicles.
Why Did the IRS Increase the Mileage Rate?
The IRS cited rising fuel prices as the reason for the rare midyear adjustment. However, the business mileage rate reflects much more than fuel costs. It is calculated using an annual study of both fixed and variable costs associated with operating a vehicle, including:
- Fuel and oil
- Insurance
- Vehicle depreciation
- Maintenance and repairs
- Tires
- Registration and other ownership costs
The medical and moving mileage rates are based only on variable operating costs. The charitable mileage rate remains fixed by federal law at 14 cents per mile.
Who Benefits from the New Rates?
The increase primarily benefits:
- Small business owners
- Self-employed professionals
- Independent contractors
- Consultants
- Gig economy workers
- Businesses that reimburse employees for business travel
For example, a taxpayer who drives 15,000 business miles during the second half of 2026 can deduct $11,400 using the new standard mileage rate—an additional $525 compared with the previous rate.
Keep Accurate Mileage Records
To claim the deduction, taxpayers should maintain detailed mileage records throughout the year. A complete mileage log should include:
- Date of each trip
- Business purpose
- Starting and ending locations
- Total miles driven
Good documentation is one of the best ways to substantiate your deduction if questioned by the IRS.
Employers Should Update Their Reimbursement Policies
Businesses that reimburse employees for using personal vehicles should update their reimbursement policies immediately.
Although the revised mileage rates became effective July 1, 2026, the IRS did not announce the change until July 13, 2026. Employers should review reimbursements issued during the first half of July to determine whether employees are owed additional reimbursement under the new rates.
Employers in states with employee reimbursement requirements, such as California, should also ensure their reimbursement practices remain compliant with applicable labor laws.
Standard Mileage vs. Actual Vehicle Expenses
Many taxpayers may choose between the following:
- Using the IRS standard mileage rate, or
- Deducting actual vehicle expenses.
While the standard mileage method is generally simpler, taxpayers with unusually high vehicle costs may benefit more from claiming actual expenses. Your tax advisor can help determine which approach provides the greatest tax savings.
Final Thoughts
The IRS’s midyear mileage rate increase reflects the higher cost of operating a vehicle in 2026 and offers additional tax savings for businesses and self-employed taxpayers. If you use your vehicle for work or reimburse employees for business travel, now is the time to update your mileage records and ensure you’re using the correct rate for travel occurring on or after July 1, 2026.
If you have questions about vehicle deductions, mileage reimbursements, or tax planning opportunities, Huckabee CPA can help you maximize your deductions while staying compliant with current IRS guidance. Reach out for a free consultation.
