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January 5, 2026

Updated 2026 IRS Mileage Rates: Key Insights for Businesses

The IRS has announced the inflation-adjusted optional standard mileage rates for 2026, which businesses and individuals use to determine the deductible costs of operating an automobile for business, charitable, medical, or moving purposes.

Effective January 1, 2026, the standard mileage rates for using a car (or a van, pickup, or panel truck) are as follows:

72.5 cents per mile for business travel (including a 35-cent-per-mile allocation for depreciation), up from 70 cents in 2025.
20.5 cents per mile for medical purposes and specified moving expenses, down from 21 cents in 2025.
14 cents per mile for service to charitable organizations, unchanged by statute.

The business mileage rate reflects an annual analysis of fixed and variable vehicle operating costs, while medical and moving rates consider only variable costs. The rate for charitable organization services remains unchanged, barring Congressional intervention.

It’s crucial to understand that the moving expense deduction is largely disallowed due to legislation, excepting active military personnel and certain intelligence community members moving for duty-related reasons.

For charitable dedications, taxpayers may opt to deduct direct expenses like gas and oil instead of using the 14 cents per mile option. However, costs like repairs, depreciation, and insurance aren't deductible.

Optimizing Vehicle Business Use: Taxpayers may choose between actual cost calculations and standard mileage rates for vehicle business use. Notably, shifting from actual costs (with methods like Section 179 or MACRS) to mileage rates isn’t allowed for those vehicles. Also, the rates aren't applicable to hired vehicles or usage beyond four vehicles simultaneously.

Additional potential deductions include parking, tolls, and state or local property taxes when attributable to business use.

Employer Reimbursement: Employers providing employee reimbursements for business vehicle expenses using the standard mileage rates may offer these tax-free, conditional on thorough documentation from the employee.

Employee Vehicle Expenses: The Tax Cuts and Jobs Act terminated the deduction of unreimbursed employee business expenses, with certain exceptions for military reservists, government officials paid on a fee basis, performing artists, and eligible educators, who can adjust these expenses against their income.

Self-employed Individuals: Continue to deduct the business part of vehicle costs. Both actual expense or standard mileage techniques apply, allowing interest on auto loans as a deductible expense.

Depreciation Options for Heavy SUVs: Vehicles over 6,000 pounds can bypass luxury vehicle depreciation limits, tapping into Section 179 deductions and bonus depreciation, capped at $32,000 in 2026. It's essential for businesses to weigh these options, considering potential recaptures if the vehicle is sold within the five-year period.

For personalized advice on maximizing your vehicle deductions or understanding documentation requirements, don't hesitate to contact our office.

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