2026 IRS Mileage Rate Adjustments Released

The Internal Revenue Service (IRS) has recently announced its annual adjustment to the 2026 optional standard mileage rates, used for calculating the tax-deductible cost of operating a vehicle for various purposes, including business, medical, charitable, and moving uses.

Effective January 1, 2026, the standard mileage rates will be:

72.5 cents per mile for business use, which includes a 35-cent per mile component for depreciation. This is an increase from the 70 cents per mile rate in 2025.
20.5 cents per mile driven for medical or moving purposes, a decrease from 21 cents in 2025.
14 cents per mile for miles driven in service of charitable organizations, unchanged for over 25 years due to statutory stipulations.

The business mileage rate is determined from an annual examination of the fixed and variable costs of operating an automobile. Similarly, medical and moving mileage rates are based on variable costs. The charitable mileage rate, however, remains unaltered unless changed by Congressional legislation.

Under the OBBBA, moving-related mileage expenses are mostly non-deductible, except for members of the Armed Forces on active orders or intelligence personnel reassigned in 2026 and beyond.

Charitable mileage deductions can alternatively be calculated by itemizing actual out-of-pocket expenses, such as gas and oil, though repairs, maintenance, and insurance are not deductible.

Key Considerations for Business Vehicle Use: Taxpayers can opt to calculate actual vehicle expenses versus using standard mileage rates. The fluctuating fuel prices and changing depreciation rates, including the 100% bonus depreciation reintroduced in late 2025, can make the actual expense method attractive initially. Importantly, once the actual method (using Sec. 179 or MACRS depreciation) is elected, the standard mileage rate cannot apply in subsequent years for the same vehicle. Additionally, this rate is not applicable for fleets greater than four vehicles or vehicles hired for transport.

Don't forget: Since business mileage deductions are frequently overlooked, remember that parking fees and tolls, alongside local property taxes applicable to the vehicle's business use, can also be claimed.

Employer Reimbursements: Employers using the standard mileage reimbursement for substantiated business travel can provide tax-free returns to employees who properly document travel details.

Employee Vehicle Expenses: The Tax Cuts and Jobs Act and the OBBBA significantly restrict deductions for employee business expenses, making them largely nondeductible through 2025, except for select groups like reserve military forces, certain government officials, or performing artists.

Self-employed individuals can continue to deduct business vehicle use on Schedule C and can add the business use portion of auto loan interest, regardless of which deduction method they choose.

Expedited Deductions for Heavy SUVs: SUVs over 6,000 pounds may benefit from favorable depreciation terms, utilizing Section 179 and bonus depreciation for substantial first-year deductions. However, long-term ramifications should be assessed given potential recapture of deductions on early disposition.

If you have queries about the optimal approach for vehicle deduction or the required documentation, don’t hesitate to contact our office.

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