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On December 29th, 2025, the Internal Revenue Service (IRS) issued its 2026 standard mileage rate increases for calculating mileage deductions. In brief, the notice provides the optional rates for computing the deductible costs of operating an automobile for business, medical, or moving expenses. The IRS mileage rate also determines the reimbursed amount for related costs. Specifically, the 2026 standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. Meanwhile, the rate for medical and moving purposes is based on variable costs. Earlier, the IRS issued inflation adjustments and increases to 401(k) and IRA contribution limits for the 2026 tax year.
Background of the IRS Mileage Rate
Generally, employers must reimburse their employees for the use of personal automobiles for business purposes. The IRS mileage rate is an alternative to tracking actual travel costs, including fuel expenses, for individual tax deductions. The standard rate, or safe harbor rate, also helps employers determine tax-free reimbursements for employees who use their personal vehicles for business. The 2026 standard mileage rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.
2026 Standard Mileage Rate Increases
The IRS issued Notice 2026-10, which contains the optional 2026 standard mileage rate and the maximum automobile cost used to calculate the allowance under a fixed- and variable-rate plan. Additionally, the notice provides the maximum fair market value of employer-provided automobiles available to employees for personal use in 2026. For this calculation, employers may use the fleet-average-valuation rule or the vehicle cents-per-mile valuation rule.
As of January 1, the 2026 standard mileage rates for cars, vans, and trucks break down as follows:
- 5 cents per mile driven for business use, up 2.5 cents from 2025.
- 5 cents per mile driven for medical purposes, down a half cent from 2025.
- 5 cents per mile driven for moving purposes for certain active-duty members of the Armed Forces (and now certain members of the intelligence community), reduced by a half cent from last year.
- 14 cents per mile driven in service of charitable organizations, equal to the rate in 2025.
Note, however, that under the Tax Cuts and Jobs Act, taxpayers may not claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Nor may they claim such a deduction for moving expenses unless they are active-duty members of the Armed Forces moving under orders to a permanent change of station.
Employer Takeaways
In conclusion, employers need to remember that taxpayers always have the option to calculate the actual costs of using their vehicle for business purposes rather than the IRS mileage rate. If taxpayers use the IRS’s standard mileage rate, they must opt to use it in the first year they use the car for business. In subsequent years, they can use the standard rate or calculate actual costs. In the meantime, if chosen, leased vehicles must use the standard mileage rate method for the entire lease period. This includes any renewals to the lease.
Finally, when determining if a job applicant needs transportation for work purposes, employers should remember that certain types of interview questions are illegal. Therefore, as an alternative to asking if they own a car, employers must ask if they have reliable transportation.
