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Recently, the Internal Revenue Service (IRS) issued Announcement 2026-11, a notice that retroactively increases its 2026 standard mileage rate for calculating mileage deductions. In brief, 2026-11 amends previous Notice 2026-10 and provides the optional rates for computing the deductible costs of operating an automobile for business, medical, or moving expenses. The IRS standard mileage rate also determines the reimbursed amount for related costs. Specifically, the latest announcement amends the 2026 mileage rate for business use, which 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 and the Department of the Treasury issued new Frequently Asked Questions addressing the new deduction for qualified overtime compensation under the One Big Beautiful Bill.
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 updates to the 2026 standard mileage rates still apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.
July 2026 Mileage Rate Increases
As mentioned, the IRS issued Announcement 2026-11, which includes the optional standard mileage rate and the maximum automobile cost used to calculate the allowance under fixed- and variable-rate plans. Additionally, the announcement provides the maximum fair market value of employer-provided automobiles available to employees for personal use. For this calculation, employers may use the fleet-average-valuation rule or the vehicle cents-per-mile valuation rule.
Importantly, as discussed, Announcement 2026-11 replaces the previous Notice 2026-10. Additionally, although the agency released the announcement on July 13th, 2026, the information it includes applies retroactively to July 1st, 2026.
As of July 1, the 2026 mileage rates for cars, vans, and trucks break down as follows:
- 76 cents per mile driven for business use, up 3.5 cents from June 30th, 2026.
- 5 cents per mile driven for medical purposes, up 3 cents from June 30th, 2026.
- 5 cents per mile driven for moving purposes for certain active-duty members of the Armed Forces and certain members of the intelligence community, raised 3 cents from June 30th, 2026.
- 14 cents per mile driven in service of charitable organizations, equal to the rate set for June 30th, 2026.
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 or members of the intelligence community 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 standard mileage rate. If taxpayers use the IRS’s 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 lease renewals.
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 whether they own a car, employers should ask whether they have reliable transportation.
The information included in the blog post is a great example of a regulatory or legislative update that is not well publicized. Even though there was no major announcement by the IRS, employers are still obligated to achieve and maintain compliance with the new standard. To assist employers, WorkWise Compliance now offers a selection of monthly and annual compliance plans to help businesses address their legal obligations under workplace laws, including virtual consulting services on important labor law compliance topics. These services can help affected businesses address current and proposed regulations on proper labor practices.
