IRS Mileage Rate Increase for 2026: New Rates Effective July 1
The IRS has announced a rare midyear increase in the optional standard mileage rates used to calculate certain deductible vehicle expenses and employee reimbursements.
The higher rates apply to eligible mileage incurred on or after July 1, 2026. This means businesses and taxpayers must use different mileage rates for the first and second halves of the year.
Updated IRS Mileage Rates for 2026
For mileage incurred from January 1 through June 30, 2026:
Business use: 72.5 cents per mile
Medical use: 20.5 cents per mile
Qualified moving expenses: 20.5 cents per mile
Charitable use: 14 cents per mile
For mileage incurred from July 1 through December 31, 2026:
Business use: 76 cents per mile
Medical use: 23.5 cents per mile
Qualified moving expenses: 23.5 cents per mile
Charitable use: 14 cents per mile
The charitable mileage rate remains unchanged because it is set by federal law.
Why Did the IRS Increase the Mileage Rates?
The IRS stated that the midyear adjustment resulted from recent increases in fuel prices.
Although the IRS typically sets mileage rates once a year, it may make an interim adjustment when significant changes in transportation costs occur.
The increase helps the standard mileage rate more closely reflect the cost of operating a vehicle for eligible business, medical, and moving purposes.
Why the July 1 Effective Date Matters
The new rates do not apply to every mile driven during 2026.
Mileage incurred before July 1 remains subject to the original 2026 rates. Eligible mileage incurred on or after July 1 may use the increased rates.
For example, a business owner who drove eligible business miles throughout the year must separate the mileage into two periods:
January 1 through June 30: 72.5 cents per mile
July 1 through December 31: 76 cents per mile
Using one mileage rate for the entire year could result in an inaccurate deduction or reimbursement.
What Employers Should Know
Businesses that reimburse employees for using their personal vehicles should review their mileage reimbursement policies, accounting systems, and expense-reporting procedures.
Under the IRS announcement, the revised rate applies when the mileage allowance is paid to the employee on or after July 1, 2026, and the related transportation expense was also incurred on or after July 1, 2026.
The previous rate continues to apply when the reimbursement is paid before July 1 or relates to an expense incurred before July 1.
Employers should clearly communicate the change to employees and make sure expense reports include the date of each trip.
Standard Mileage Rate or Actual Vehicle Expenses?
The standard mileage method is optional. Eligible taxpayers may use it instead of calculating the deductible portion of their actual vehicle expenses.
For business vehicle use, actual expenses may include items such as:
Fuel and oil
Repairs and maintenance
Insurance
Registration fees
Lease payments
Depreciation
The standard mileage rate is designed to account for many of these fixed and variable vehicle costs through one per-mile amount.
The better method depends on the vehicle, total operating costs, business-use percentage, and the taxpayer’s prior tax elections. Certain restrictions may apply when choosing or changing methods.
Business-related parking fees and tolls may also be deductible separately when properly documented.
Medical and Moving Mileage Rules
The medical mileage rate may apply when a vehicle is used to obtain qualifying medical care. The transportation must generally be primarily for and essential to receiving medical care.
The moving mileage rate is more limited. The moving expense deduction is generally available only for certain moves involving qualifying active-duty members of the Armed Forces and certain members of the intelligence community.
Taxpayers should confirm that the underlying medical or moving expense qualifies before applying the mileage rate.
What About Charitable Mileage?
The mileage rate for using a vehicle while providing qualifying services to a charitable organization remains 14 cents per mile for all of 2026.
Because this rate is established by federal law, it was not included in the midyear increase.
What Businesses and Taxpayers Should Do Now
Businesses and taxpayers should take the following steps:
Update mileage reimbursement policies effective July 1, 2026.
Separate mileage records for the first and second halves of the year.
Record the date, destination, mileage, and purpose of each eligible trip.
Confirm that payroll and bookkeeping systems use the correct rate.
Review whether the standard mileage or actual expense method offers the better tax result.
Retain receipts and supporting records for separately deductible expenses.
Accurate Mileage Records Matter
Mileage deductions and reimbursements can add up quickly, but they must be supported by reliable records.
A mileage log should generally identify when the trip occurred, where the taxpayer traveled, how many miles were driven, and the business or qualifying purpose of the trip.
Waiting until tax season to reconstruct an entire year of mileage can increase the risk of missing trips, using the wrong rate, or creating incomplete documentation.
The midyear rate change makes timely recordkeeping especially important for 2026.
Need Help Reviewing Your Vehicle Expenses?
Virtual CPAs can help you review your mileage records, employee reimbursement procedures, and business vehicle expenses so you can apply the correct rates and prepare for tax season with confidence.
This article is provided for general informational purposes only and does not constitute tax or legal advice. Tax treatment depends on the specific facts and circumstances of each taxpayer.