The IRS has made a midyear increase in the 2026 IRS standard mileage rate for business vehicle use, including cars, SUVs, vans, pickup trucks and panel trucks. These rates apply to gasoline- and diesel-powered vehicles as well as electric and hybrid vehicles. Whether the rate increase affects your business depends on the business vehicle expense reporting method you choose. The IRS also increased the medical and moving mileage rates.
Key Takeaways
- The IRS increased the standard business mileage rate from 72.5 cents to 76 cents per mile effective July 1, 2026.
- Businesses can generally choose between the standard mileage rate and the actual expense method for deducting vehicle expenses.
- The medical and moving mileage rate increased from 20.5 cents to 23.6 cents per mile for the second half of 2026.
- The charitable mileage rate remains 14 cents per mile.
Business Vehicle Expense Reporting Options
If you use a vehicle for business purposes, you generally have two options for claiming a business vehicle expense deduction.
Actual Expense Method
You may deduct the actual expense attributable to your business use of a vehicle. These include:
- Gas
- Oil
- Tires
- Insurance
- Repairs
- Licenses
- Vehicle registration fees
In addition, you may claim a depreciation allowance based on the percentage of business use. However, annual write-offs for certain passenger automobiles are subject to “luxury car” limits that are indexed annually for inflation.
The maximum first-year depreciation deduction allowed for a passenger car subject to the luxury car limits and placed in service in 2026 is generally $20,300 ($12,300 + $8,000 assuming bonus depreciation is claimed). Therefore, the maximum first-year deduction for a vehicle used 90% for business in 2026 would be limited to $18,270 (90% of $20,300). Heavier SUVs, pickups, vans and panel trucks may qualify for larger first-year depreciation deductions.
Keeping track of every vehicle-related expense under the actual expense method can be burdensome, making the standard mileage rate an attractive alternative for many businesses.
Standard Mileage Rate Method
Most taxpayers can choose the IRS standard mileage rate instead of tracking actual vehicle expenses. However, you generally can’t use the standard mileage rate if you use five or more vehicles simultaneously, such as in a fleet operation.
To use the standard mileage rate for a vehicle you own, you generally must elect it during the first year the vehicle is available for business use. In later years, you may choose either the standard mileage rate or the actual expense method. However, if you switch to actual expenses, special depreciation rules apply.
For leased vehicles, taxpayers who elect the standard mileage rate must continue using that method for the entire lease period, including renewals.
Although the standard mileage rate simplifies recordkeeping, you must still document:
- Mileage
- Dates
- Destinations
- Names and relationships of business parties involved
- Business purpose of the trip
Most employers can’t deduct unreimbursed business mileage on their federal income tax returns. However, employers may reimburse employees tax-free using the standard mileage rate under an accountable plan if substantiation requirements are met.
2026 Business Mileage Rate Adjustment
The IRS generally updates the standard mileage rates annually based on a study of vehicle operating costs. However, unusual circumstances can result in a midyear adjustment. The last midyear mileage rate change occurred in 2022.
For 2026, the IRS established a standard mileage rate of 72.5 cents per mile for business use of a vehicle. Due to recent increases in fuel prices, the IRS announced a midyear adjustment.
Effective July 1 through December 31, 2026, the standard business mileage rate increased to 76 cents per mile, up to 3.5 cents per mile from the rate that applied during the first half of the year.
Medical and Moving Mileage Rate Changes
Effective July 1 through December 31, 2026, the mileage rate for qualifying medical travel and moving increased to 23.5 cents per mile, up from 20.5 cents per mile during the first half of the year.
The rate is significantly lower than the business mileage rate because it does not include depreciation, which isn’t an allowed vehicle expense deduction for medical or moving purposes.
Medical mileage is deductible only if:
- You itemize deductions.
- Your total eligible medical expenses exceed 7.5% of your adjusted gross income.
Moving expenses, including mileage, are deductible only for certain active-duty personnel and certain members of the intelligence community. If you qualify, you do not have to itemize deductions to claim the moving expense deduction.
The 14-cent-per-mile charitable mileage rate remains unchanged because it is set by statute and can only be modified by congress.
Which Vehicle Expense Deduction Is Right for You?
Choosing between the standard mileage rate and the actual expense method depends on several factors, including your business use, vehicle costs and tax situation. The midyear increase to the 2026 IRS mileage rates adds another consideration when planning your tax strategy.
Boulay is here to help you determine which vehicle expense deduction method is right for your situation and to help maximize your available tax savings. Use the button below to connect with an advisor.