2026 Mileage Rates: A Guide for Your Business

The IRS has announced the 2026 standard mileage rates, reflecting adjustments for inflation. These rates are crucial for calculating deductible costs associated with vehicle use for business, charitable, medical, or moving purposes.

As of January 1, 2026, the rates for using a car, van, pickup, or panel truck are as follows:

72.5 cents per mile for business driving, which includes a 35-cent allocation for depreciation. This is an increase from 70 cents in 2025.
20.5 cents per mile for medical or certain moving expenses, decreased from 21 cents in 2025.
14 cents per mile for charitable organization service, unchanged for over 25 years due to statutory requirements. Only Congressional action can modify this rate.

The business mileage rate stems from a comprehensive annual study on the fixed and variable costs of vehicle operation, whereas the medical and moving rates focus chiefly on variable costs. It's important to note that the Tax Cuts and Jobs Act and the subsequent One Big Beautiful Bill Act (OBBBA) significantly altered the landscape of deductible moving expenses, generally disallowing them except for active duty military and certain intelligence community members.

When involved in charitable work, an alternative to the 14-cents-per-mile deduction is itemizing connected out-of-pocket expenses such as gas. Nevertheless, general maintenance and repair costs are non-deductible.

Considerations for Business Vehicle Use – Taxpayers may opt for actual expense calculations over standard mileage rates. While fuel prices fluctuate, factors such as bonus depreciation can make actual costs appealing, especially during the first year of use. However, once you switch to the actual method (incorporating Sec. 179, MACRS, etc.), reverting to standard rates for that vehicle is not permitted.

A nuance often overlooked is that additional costs like parking, tolls, and business-attributable state and local taxes are separately deductible alongside the mileage rate.

Employer Reimbursement – Tax-free reimbursement is possible when employers compensate employees with a standard mileage allowance for substantiated business use, provided proper documentation is presented by the employee.

Employee Vehicle Expenses – Post-2017, itemizing employment-related auto expenses is less straightforward due to tax law changes, with certain exceptions for reserved military members, government officials, artists, and educators.

Self-employed Filers – These individuals continue to claim vehicle-related business deductions, including interest on auto loans, whether using standard or actual expense methods.

Heavy SUVs and Tax Benefits – SUVs exceeding 6,000 pounds aren't restricted by luxury auto depreciation limits, allowing significant first-year tax deductions through Section 179 and bonus depreciation. Such benefits, however, come with caveats like potential deduction recapture.

For detailed advice on optimizing vehicle-related tax deductions and required documentation, feel free to contact our office for expert guidance tailored to your needs.

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