2026 Mileage Rates Update: Key Changes and Implications

The Internal Revenue Service (IRS) has announced the updated standard mileage rates for 2026, reflecting adjustments for inflation, to help taxpayers calculate the deductible costs of using a vehicle for various purposes, including business, medical, and charitable activities.

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

  • 72.5 cents per mile for business travel, which includes a 35-cent-per-mile allowance for depreciation. This marks an increase from the 70 cents per mile rate in 2025.

  • 20.5 cents per mile for medical travel and certain moving expenses, slightly down from 21 cents per mile in 2025.

  • 14 cents per mile for service to charitable organizations, a rate which has remained unchanged for over 25 years, as set by law.

The business mileage rate is determined by analyzing fixed and variable automotive costs, while rates for medical and moving purposes rely solely on variable costs from the same study. The charitable mileage rate is legislated and requires Congressional intervention for amendment.

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The Tax Cuts and Jobs Act and the One Big Beautiful Bill Act (OBBBA) rendered moving-related mileage expenses non-deductible permanently, except for specific cases such as military relocations or intelligence personnel reassignments.

When volunteering for a charitable organization, taxpayers choosing not to use the established mileage rate can alternatively itemize deductions for direct expenses like gas and oil, but not for general maintenance, repairs, or depreciation costs.

Key Considerations for Business Vehicle Use: Taxpayers can choose between the standard mileage rate or actual expenses to deduct business vehicle use. The first year of business use might favor the actual cost method due to possible bonus depreciation and elevated depreciation limits. It’s essential to note that opting for actual expenses disallows reverting to standard rates and vice-versa on vehicles equipped with prior bonus or MACRS depreciation.

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Additionally, deductions for parking, tolls, and vehicle-related property taxes augment the standard mileage deduction but are frequently overlooked.

Employer Reimbursements: Employee reimbursements under the standard mileage method remain tax-free, contingent upon the documentation of the travel’s business intent, time, place, and mileage.

Employee Vehicle Expenses: With the removal of these deductions under the Tax Cuts and Jobs Act, only certain groups such as reservists, select artists, and educators can claim adjustments. For them, unreimbursed travel may still be deductible.

Self-employed Tax Deductions: Self-employed individuals can deduct business vehicle use through either method. Loan interest tied to the vehicle is also deductible on Schedule C.

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Heavy SUVs Tax Strategy: Vehicles exceeding 6,000 pounds are exempt from luxury depreciation limits and can utilize Section 179 deduction up to $32,000 in 2026, subsequent to bonus depreciation. However, improper disposal of such vehicles before the end of their 5-year class life can trigger recapturing of deductions.

If you require further clarification on optimizing your vehicle-related business deductions or maintaining the requisite documentation, do not hesitate to contact our office.

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