Standard Mileage Rates Increase for 2026

The IRS has announced the standard mileage rates for 2026, with the business rate climbing to 72.5 cents per mile, a 2.5-cent increase from 2025. These annual adjustments reflect updated cost data and inflation, providing businesses and taxpayers with revised deduction calculations for vehicle expenses in the coming year.

2026 Standard Mileage Rates

Beginning January 1, 2026, the optional standard mileage rates for cars, vans, pickup trucks, and panel trucks will be:

• Business use: 72.5 cents per mile (up 2.5 cents from 2025)

• Medical purposes: 20.5 cents per mile (down 0.5 cents from 2025)

• Moving purposes: 20.5 cents per mile for qualifying active-duty Armed Forces members and certain intelligence community members (down 0.5 cents from 2025)

• Charitable organizations: 14 cents per mile (unchanged from 2025)

Expanded Coverage for Intelligence Community

A notable change in 2026 involves the moving expense deduction. Under the One Big Beautiful Bill Act, certain members of the intelligence community now join active-duty Armed Forces members in qualifying for the moving mileage deduction when relocating under orders to a permanent change of station.

How Rates Are Determined

The methodology behind these rates varies by category:

• Business rate: Based on comprehensive annual studies of both fixed and variable costs of vehicle operation

• Medical and moving rates: Calculated using only variable costs from the annual study

• Charitable rate: Set by statute and remains constant

This explains why business rates typically see larger adjustments compared to medical and moving rates, which fluctuate based on variable costs like fuel and maintenance.

Vehicle Type Coverage

The 2026 rates apply to all vehicle types, including:

• Fully-electric vehicles

• Hybrid automobiles

• Gasoline-powered vehicles

• Diesel-powered vehicles

This comprehensive coverage ensures consistent deduction calculations regardless of your vehicle's power source.

Important Usage Rules

Understanding the rules for mileage rate elections is crucial for maximizing tax benefits:

For owned vehicles:

• Must choose the standard mileage rate in the first year the vehicle is available for business use

• In subsequent years, can switch between standard mileage rate and actual expense methods

For leased vehicles:

• Must use the standard mileage rate for the entire lease period, including any renewals

• Cannot switch to actual expense method during the lease term

Current Deduction Limitations

It's important to note that most employees cannot claim unreimbursed vehicle expenses as miscellaneous itemized deductions. However, specific categories of workers retain this ability:

• Certain members of reserve components of the Armed Forces

• Qualifying state and local government officials

• Certain performing artists

• Eligible educators (who may also claim itemized deductions for some unreimbursed travel expenses)

Strategic Planning Considerations

The 2.5-cent increase in the business mileage rate provides additional tax savings for companies and self-employed individuals who drive significant miles for business purposes. For high-mileage users, this increase can translate to meaningful annual savings.

Example calculation: A business owner driving 20,000 miles annually for business purposes will see an additional $500 in deductions compared to 2025 rates (20,000 miles × $0.025 = $500).

Documentation Requirements

Regardless of which method you choose, maintaining detailed records remains essential:

• Mileage logs with business purpose

• Dates and destinations

• Odometer readings

• Supporting documentation for business necessity

Alternative to Standard Rates

Remember that using standard mileage rates is optional. Taxpayers can instead calculate actual vehicle expenses, which may be more beneficial depending on individual circumstances, vehicle costs, and usage patterns.

---

Questions?

Contact HFM CPAs for guidance on optimizing your vehicle expense deductions and determining whether standard mileage rates or actual expense calculations provide greater tax benefits for your situation.

HFM CPAs provides specialized accounting, tax, and assurance services to individuals and businesses across Connecticut and Rhode Island.