The IRS has officially announced the 2026 standard business mileage rate. It’s 72.5 cents per mile, up 2.5 cents from 2025.
This change impacts millions of business owners, freelancers and employers who track mileage for business-related driving. Here’s what the new rate means, who it affects and how to stay compliant.
What is the 2026 IRS standard mileage rate?
The standard mileage rate is the amount the IRS allows taxpayers to deduct for each mile driven for business purposes.
Beginning January 1, 2026, the rates are:
- 5 cents per mile for business use (up 2.5 cents from 2025).
- 5 cents per mile for medical purposes or qualified moving expenses for certain active-duty military and intelligence community members (down 0.5 cents).
- 14 cents per mile for service to charitable organizations (unchanged)
The IRS announced the update in its official bulletin, which you can review directly on the IRS website. The rates apply to cars, vans, pickups, and panel trucks used for business. They apply to gasoline and diesel-powered vehicles, as well as fully electric and hybrid automobiles.
Why did the IRS increase the mileage rate?
Each year, the IRS adjusts the mileage rate based on national cost data. The rates are adjusted to reflect updated cost data and annual inflation adjustments.
Some of the factors taken into consideration for adjustments include:
- Fuel prices
- Vehicle maintenance and repairs
- Insurance
- Depreciation
- Registration and ownership costs
Rising operating expenses over the past year pushed the rate higher. In simple terms, it now costs more to operate a vehicle for business, and the IRS is acknowledging that reality.
Who can use the standard mileage rate?
The standard mileage rate is available to many, but not everyone. You can typically use it if you are:
- A small business owner
- A self-employed contractor or freelancer
- An employee using your personal vehicle for business (when reimbursements apply)
- A startup founder tracking early operating costs
However, you cannot use the standard mileage rate if:
- You’ve used accelerated depreciation on the vehicle
- You’ve claimed a Section 179 deduction on the vehicle
- You operate a fleet of five or more vehicles at the same time (with some exceptions)
The IRS has specific rules regarding vehicle expense deduction methods to prevent “double-dipping” or inconsistent depreciation application. Depending on the method chosen, you might be locked into it for the life of that vehicle. Always confirm eligibility with a tax professional.
Standard Mileage vs. Actual Expense Deduction
The IRS allows two methods for deducting vehicle expenses. Here’s how they compare.
- Standard mileage rate
- You multiply your business miles by 72.5 cents.
- It’s simple, fast, and requires less documentation.
- Actual expense method
You deduct the actual costs of operating the vehicle. This includes:
- Gas
- Oil
- Repairs
- Insurance
- Registration fees
- Depreciation
This actual expense method can result in a higher deduction, but it requires more detailed recordkeeping. Many small businesses prefer the standard rate because it’s easier to manage.
How the 2026 Rate Impacts Your Tax Deduction
A 2.5-cent increase adds up quickly. Here’s a simple example.
If you drive 15,000 business miles in 2026:
- 2025 rate (70.0 cents): $10,500 deduction
- 2026 rate (72.5 cents): $10,875 deduction
That’s an extra $375 in deductions from the same driving mileage. For businesses with frequent travel, the difference can be meaningful.
Mileage Tracking is Required by the IRS
You can’t claim the deduction without accurate records. The IRS requires documentation that includes:
- Date of the trip
- Business purpose
- Starting and ending mileage
- Total miles driven
Manually tracking mileage is error-prone and time-consuming. This can be overcome with automated mileage tracking. Automated mileage tracking can help to ensure every deductible mile is captured consistently.
How Mileage Can Be Tracked Automatically
Automatic mileage tracking has become widely accessible and easy to use. Many mobile apps track mileage using your phone’s GPS, recording trips in the background without manual input.
Common features include:
- Automatic trip detection when driving starts
- One-swipe classification as business or personal
- Detailed trip logs with time, distance and route
- Cloud-stored records that can be exported at tax time
Some tools also allow notes to be added for business purpose documentation. This significantly reduces missed miles and manual errors, especially for frequent drivers.
Best Practices for Automatic Mileage Tracking
To stay compliant, automatic tracking still requires user review. Recommended habits include:
- Reviewing trips weekly to confirm classifications
- Adding brief notes explaining the business purpose
- Keeping records for at least three years
- Backing up mileage logs digitally
Automation captures the data, but oversight ensures accuracy.
Mileage Reimbursement Considerations for Employers
Many employers reimburse employees using the IRS standard mileage rate. With the 2026 increase:
- Employers may need to update reimbursement policies
- Internal travel guidelines may need adjustments
- Changes should be communicated to employees
Failing to align with the updated rate can create payroll and compliance issues.
Final Takeaway
The IRS raising the 2026 business mileage rate to 72.5 cents per mile provides a larger deduction for drivers. It reflects real-world cost increases and provides a larger deduction for business travel, but the value of the increase depends on accurate tracking and clean records.
Automatic tracking tools make it easier to capture every eligible mile while meeting IRS requirements.
With the right habits and records in place, the updated rate can translate into meaningful tax savings for the year ahead.
Contact us if you have questions about tracking and claiming business mileage expense in 2025—or claiming 2025 expenses on your 2025 tax return.