IRS Raises Standard Mileage Rate for Business Use in 2026

By Ginika Igboke

The Internal Revenue Service has announced an increase in the standard mileage rate for vehicles used for business purposes in 2026, raising it by 2.5 cents from the previous year, according to a statement released on Dec. 29.

Businesses that use personal vehicles for work may deduct certain operating costs when calculating taxes, subject to specific limits. These deductions can be calculated using either the IRS standard mileage rate or the actual expense method. The standard rate is determined annually based on an analysis of both fixed and variable vehicle operating costs.

Beginning Jan. 1, 2026, the standard mileage rate for business use of cars, vans, pickup trucks, and panel trucks will be 72.5 cents per mile, up from 70 cents in 2025. Mileage rates are also used to calculate deductions for vehicles driven for medical, charitable, and certain moving purposes.

For medical travel, the rate will be 20.5 cents per mile in 2026, a decrease of 0.5 cents from the prior year. The charitable mileage rate will remain unchanged at 14 cents per mile.

The IRS said the optional standard mileage rate may also be used to calculate deductible vehicle costs for moving purposes by certain active-duty members of the U.S. Armed Forces and, under recent legislation, eligible members of the intelligence community. That rate will also be 20.5 cents per mile in 2026, down slightly from 2025.

The agency clarified that the updated rates apply to gasoline, diesel, hybrid, and fully electric vehicles. Taxpayers who own a vehicle and choose the standard mileage rate for business use must use that method in the first year the vehicle is placed into service. In later years, they may switch between the standard rate and the actual expense method. For leased vehicles, however, the standard mileage rate must be used for the entire lease term, including renewals.

Motus, a company specializing in vehicle reimbursement and risk mitigation, said overall driving costs have continued to change nationwide, citing higher vehicle prices, increased insurance and maintenance costs, and fuel prices that remain elevated despite recent declines.

“The increase in the IRS standard mileage rate highlights how critical work-related driving remains to both operations and financial performance,” Motus CEO Phong Nguyen said. “Accurate reimbursement is essential for organizations to manage budgets effectively while supporting employees who rely on personal vehicles for work.”

Motus noted that it has provided data used by the IRS in setting mileage rates since 1981. In a Dec. 29 blog post, the company said national mileage rates often fail to capture regional cost differences and variations in vehicle types, meaning the standard rate can function as a baseline rather than a true reflection of individual driving costs.

According to the IRS, businesses operating five or more vehicles at the same time, such as fleet operations, are generally not eligible to use the standard mileage rate. In some cases, businesses may qualify to calculate deductions using both the standard mileage rate and the actual expense method, and the agency recommends comparing both approaches to determine which yields the greater tax benefit.