January 5, 2026

2026 Mileage Rates Revealed: Key Updates

The Internal Revenue Service (IRS) has unveiled the inflation-adjusted 2026 optional standard mileage rates, essential for accurately deducting automobile operation costs across various purposes including business, charitable activities, medical reasons, or moving expenses.

Effective from January 1, 2026, the standard mileage reimbursements for vehicles such as cars, vans, pickup trucks, or panel trucks are as follows:

72.5 cents per mile for business-related driving, featuring a 35-cent allocation for depreciation, marking an increase from 70 cents per mile in 2025.
20.5 cents per mile for medical purposes or certain moving expenses, down from the prior 21 cents per mile.
14 cents per mile for charitable organization services, unchanged and regulated by federal statute for over 25 years.

The business mileage rate derives from an annual assessment of an automobile’s fixed and variable operational costs. In contrast, the medical and moving rates focus solely on variable costs from the same analysis. Notably, the charitable rate remains unchanged as dictated by Congressional mandates.

Amendments from the One Big Beautiful Bill Act (OBBBA) permanently restrict moving-related deductions, except for certain military and intelligence community relocations starting 2026.

For individuals using personal vehicles for charitable causes, taxpayers who itemize can opt to deduct expenses like gas and oil directly. However, costs associated with general vehicle repair, maintenance, depreciation, and registration fees aren’t eligible.

Business Vehicle Usage Considerations – Taxpayers may opt to calculate actual vehicle expenses for business use rather than the standard mileage allowance. Given fluctuations in fuel costs and variations in depreciation incentives, the actual cost method can be beneficial, especially in a vehicle's initial service year. The phasing out of the 100% bonus depreciation (2018-2022) resumed in full for the remainder of 2025 post a reduction period.

It’s crucial to note that once the actual expense method is chosen, the standard mileage rate can't be reverted to for that vehicle in subsequent years. Furthermore, this restriction doesn’t apply to business vehicles used for hire or fleets exceeding four vehicles simultaneously.

A frequently overlooked benefit for business operators using the standard mileage rate is the deductibility of parking fees, tolls, and property taxes incurred in business-related vehicle usage.

Employer Reimbursement – When employees are compensated for car expenses based on validated mileage through standard allowances, such reimbursement is tax-free provided that comprehensive travel documents are furnished to the employer.

Employee Vehicle Expenses – The Tax Cuts and Jobs Act curbed itemized employee expense deductions through 2025, while the OBBBA made these non-deductible permanently. However, certain professionals, including reserve military members and government officials, may reclaim travel expenses as income adjustments.

Self-employed Individuals – They can deduct vehicle business use, whether through standard mileage or actual expenses. Additionally, interest on car loans attributable to business use is deductible on Schedule C.

Heavy SUVs Benefits – SUVs surpassing 6,000 pounds are exempt from luxury auto depreciation limits, enabling expansive deductions through Section 179 and bonus depreciation up to $32,000 in 2026. Despite potential for large deductions, caution is advised, as recapturing deductions may become necessary if the vehicle is sold within its 5-year class life.

For detailed consultation on optimizing vehicle expense deductions and understanding requisite documentation, don't hesitate to reach out to our office.

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