2026 IRS Mileage Rates: Key Updates & Implications

The Internal Revenue Service (IRS) has unveiled the inflation-adjusted standard mileage rates for 2026, crucial for calculating deductible vehicle operating costs for various purposes such as business, charitable work, medical, or relocation driven by IRS guidelines.

Effective January 1, 2026, the new standard mileage rates for different vehicle uses are as follows:

For business use: 72.5 cents per mile, including a 35-cent-per-mile allotment for depreciation. This marks an increase from the 70 cents per mile set in 2025.
For medical and specific moving purposes: 20.5 cents per mile, a slight decrease from the previous 21 cents per mile in 2025.
For charitable service: 14 cents per mile, a rate statutorily set and unchanged for over 25 years.

The business mileage rate stems from an annual assessment of both fixed and variable automobile operating costs. In contrast, the charitable rate relies on legislative processes for adjustments. The rate for medical purposes is solely based on variable costs.

An important note: The One Big Beautiful Bill Act (OBBBA) prevents moving expenses from being deducted, except for active military personnel under orders and those in the intelligence community required to relocate due to assignment changes starting from 2026.

When serving charitable organizations, taxpayers who itemize deductions may opt to write off direct, out-of-pocket vehicle-related expenses like fuel instead of using the 14 cents mileage rate. However, general repairs, maintenance, and related fees are non-deductible.

Key Business Use Considerations: Taxpayers might find calculating actual vehicle expenses more beneficial than using standard mileage rates, especially with fluctuating fuel prices and potential depreciation benefits. While 100% bonus depreciation was available between 2018-2022, it phased out thereafter but will return to full strength in late 2025.

It’s crucial to know that the standard mileage rate is inapplicable if actual cost methods (including Section 179, bonus, or MACRS depreciation) were chosen in prior years, specifically on a per-vehicle basis. Additionally, this rate doesn’t apply to vehicles hired for service or when more than four vehicles are operated simultaneously.

Importantly, parking fees, tolls, and state/local property taxes assessed on the business-use portion of a vehicle can still be deducted supplementing the mileage rate method.

Employer Reimbursement: Car expense reimbursements made using the standard mileage rate that are well-documented by employees remain tax-free.

Employee Vehicle Expenses: The Tax Cuts and Jobs Act ceased deductions for employee car expenses until 2025, reinforced to permanency by the OBBBA. Notably, certain Armed Forces reserves, fee-paid government officials, and qualified artists still maintain deduction privileges on applicable expenses.

Nevertheless, self-employed individuals can keep claiming business vehicle usage under tax deductions. Regardless of the method used (standard mileage or actual costs), they can also account for business-use interest on car loans on their Schedule C.

Faster Write-Offs with Heavy SUVs: Heavy vehicles over 6,000 pounds evade luxury auto depreciation limits, unlocking a generous Section 179 deduction (up to $32,000 in 2026) alongside bonus depreciation. However, future tax consequences need consideration, especially with early vehicle disposals proposing recapturing of prior deductions onto taxable income.

For expert advice on vehicle business-use deductions and documentation requirements, do not hesitate to contact our office.

Share this article...

Facebook

Twitter WhatsApp LinkedIn Pinterest Pocket Reddit Email

Want tax & accounting tips and insights?

Sign up for our newsletter! Each month, we will send you a roundup of our latest blog content covering the tax and accounting tips & insights you need to know.

I confirm this is a service inquiry and not an advertising message or solicitation. By clicking “Submit”, I acknowledge and agree to the creation of an account and to the and .

Welcome to The Virtual Accounting Office Smart, specialized accounting services for real estate, real estate investors, e-commerce, and other business.

Thanks for checking out The Virtual Accounting Office! Whether you're a realtor, real estate investors, online store owner, or a busy landscaper, we know running your business is hard enough without worrying about taxes and bookkeeping.

Please fill out the form and our team will get back to you shortly The form was sent successfully

First Name *

Last Name *

Email *

Mobile Number

Message *