IRS Unveils 2026 Mileage Rates: Key Updates for Taxpayers

In keeping with its annual tradition, the Internal Revenue Service (IRS) has announced its inflation-adjusted optional standard mileage rates for 2026, applicable to those calculating deductible automobile expenses related to business, charitable, medical, or moving purposes.

Effective January 1, 2026, the standard mileage rates for vehicles like cars, vans, pickups, or panel trucks will be as follows:

Business mileage rates will be set at 72.5 cents per mile, which includes a 35-cent-per-mile allocation for depreciation, marking an increase from 70 cents per mile in 2025.
For medical purposes and certain moving expenses, the rate is reduced slightly to 20.5 cents per mile from 21 cents in 2025.
The charitable mileage rate remains unchanged at 14 cents per mile, a rate that has been statutorily fixed for over 25 years and can only be modified by Congress.

These adjustments are based on a comprehensive review of the fixed and variable costs associated with operating a vehicle. Notably, the statuteally fixed charitable mileage rate stands firm, highlighting the significance of Congressional action for any changes. While moving-related expenses were largely disallowed by the One Big Beautiful Bill Act (OBBBA), exceptions remain for active-duty members of the Armed Forces and members of the intelligence community facing relocations due to assignment changes.

Taxpayers engaging in charitable services have alternative deduction options. Instead of the 14 cents per mile rate, out-of-pocket expenses directly linked to these services, such as fuel costs, are deductible, excluding general maintenance or registration fees.

Considerations for Business Vehicle Use – Taxpayers may either opt for the standard mileage rate or the actual expense method when calculating business vehicle costs. Given volatile fuel prices and updates in bonus depreciation rules, analyzing the most beneficial approach is crucial, especially given the phased reinstatement of 100% bonus depreciation throughout 2025.

The standard mileage rate is unavailable if the actual method was previously employed, particularly if leveraging Section 179 or MACRS depreciation. Restrictions apply for vehicles for hire or simultaneous use of multiple vehicles.

Overlooked deductible expenses include parking, tolls, and proportionate vehicle property taxes.

Employer Reimbursement – Employers can offer tax-free reimbursements to employees for verified business mileage, provided adequate substantiation of business travel particulars is maintained by the employee.

Employee Vehicle Expenses – The Tax Cuts and Jobs Act, along with the OBBBA, eliminated Schedule A deductions for unreimbursed employee auto expenses. However, reservists, some government officials, performing artists, and eligible educators retain deduction rights in specific contexts on Schedule 1 of Form 1040.

Self-Employed Taxpayers – Deducting vehicle expenses remains an option, including loan interest proportional to business use documented on Schedule C.

Heavy SUVs: Faster Depreciation – SUVs exceeding 6,000 pounds can leverage Section 179 and bonus depreciation deductibles up to $32,000. Consideration of recapture upon early asset disposal due to their 5-year class life property should be included in financial planning.

For insights into the most advantageous deduction methods or required documentation, feel free to contact our office for professional guidance.

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