The Internal Revenue Service updates its mileage rates each calendar year to reflect the costs of operating vehicles. For 2026, the IRS business mileage rate increased to 72.5 cents per business mile from it’s rate of 70 cents per business model in 2025.
For taxpayers who are self-employed or own a qualifying business, you may use this optional standard mileage rate instead of your actual vehicle expenses, as long as they meet the IRS’s eligibility and record keeping rules. Employers can also use this updated rate for their structured reimbursement plans.
For small business owners who drive to client meetings, project sites, vendor locations, or other work-related destinations, this annual rate for business use of a car can affect your company’s deductible costs and mileage reimbursement policies.
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What Is the IRS Standard Business Mileage Rate for 2026?
The IRS standard mileage rate 2026 for businesses is 72.5 cents per mile driven for qualifying business purposes. This optional standard deduction rate provides a simpler way to calculate vehicle deductions without separately tracking every cost of operating a car, van, pickup, or panel truck.
The rate applies to fully electric, hybrid-electric, gasoline, and diesel-powered vehicles.
| Vehicle Use | 2026 Mileage Rate | Change From 2025 |
| Business use | 72.5 cents per mile | Increased by 2.5 cents |
| Medical purposes | 20.5 cents per mile | Decreased by half a cent |
| Moving purposes for eligible taxpayers | 20.5 cents per mile | Decreased by half a cent |
| Charitable use | 14 cents per mile | No change |
Key Factors Influencing the IRS Mileage Rate Determination
The Internal Revenue Service sets the business mileage rate using an annual study of the fixed and variable costs of operating an automobile. The resulting per-mile figure is intended to reflect the average cost of using a personal vehicle for qualifying business purposes.
Fuel Prices and Other Variable Costs
Variable costs increase or decrease based on how much a vehicle is driven. Gas prices are a significant factor, along with oil, routine maintenance, tires, and repairs. When these costs rise, they can affect the cost of each business mile driven.
Insurance Premiums and Vehicle Depreciation
Fixed costs do not necessarily change with each trip, but they remain part of the overall cost of owning and operating a vehicle. Insurance premiums as well as vehicle depreciation are two important examples. Changes in insurance costs, vehicle values, and broader economic conditions can influence the annual mileage rate.
Inflation and the Overall Cost of Driving
Inflation can affect both fixed and variable costs. Higher prices for fuel, replacement parts, labor, and vehicle maintenance may increase the amount drivers spend to keep a car on the road. The IRS considers these types of changes when determining its annual mileage rates.
How to Calculate Your Business Mileage Deduction
The basic calculation is straightforward:
Total business miles driven × applicable IRS mileage rate = potential mileage deduction
For example, a self-employed taxpayer who drives 10,000 qualifying business miles during 2026 could calculate the deduction as follows:
10,000 business miles × $0.725 = $7,250
That $7,250 figure represents the business-use mileage deduction before considering other separately deductible vehicle-related costs.
Mileage deductions are often one part of a broader tax planning and record keeping process. A Raleigh tax consultant with experience in small business deductions can help review how vehicle use, expense tracking, and deduction methods fit into your company’s overall tax picture.
Expenses That May Be Deducted Separately
The standard mileage rate generally includes common costs such as depreciation, fuel, maintenance, repairs, oil, tires, and insurance. Taxpayers using the standard mileage method generally cannot deduct those same costs separately for the same vehicle.
However, business-related parking fees and tolls may be deductible in addition to the standard mileage rate. For example, a Raleigh business owner who drives to a client meeting in Durham may be able to claim the applicable business mileage plus parking fees paid at the client location. Parking costs at a regular work location are generally considered nondeductible commuting expenses.
Choosing Between Standard Mileage Rate vs Actual Expenses
The standard mileage rate simplifies your small business tax reporting, but it is not always the better method for every vehicle or every business. The actual expense method requires taxpayers to track and calculate the business-use percentage of vehicle costs, including fuel, insurance, registration, repairs, maintenance, lease payments, and depreciation.
For some taxpayers, the standard mileage method may be easier to maintain and support with records. For others, actual expenses may result in a larger deduction, particularly when a vehicle has substantial operating or ownership costs.
When the Standard Mileage Rate May Not Be Available
The standard mileage rate is not available in every situation. A taxpayer may be unable to use it if they:
- Operate five or more vehicles at the same time, such as in a fleet operation
- Claimed Section 179 depreciation for the vehicle
- Used MACRS depreciation for the vehicle
- Claimed special depreciation allowances
- Used actual expenses for a leased vehicle after 1997
The method decision can affect future deductions, depreciation treatment, and recordkeeping. Reviewing the options before a new vehicle is placed in business service can help prevent avoidable limitations later.
IRS Compliance: Recordkeeping and Mileage Logs
A mileage deduction depends on more than a rough estimate of how often a vehicle was used for work. The IRS requires taxpayers to support business vehicle expenses with adequate records or other sufficient evidence.
For many business owners, the most reliable approach is to maintain consistent bookkeeping for your small business, including keeping a mileage log. This means recording trips at or near the time they occur rather than trying to recreate business mileage at the end of the year.
What to Include in a Business Mileage Log
A clear mileage log should generally document:
- The date of each business trip
- The starting location and destination
- The specific business purpose of the trip
- The number of business miles driven
- The vehicle’s beginning and ending odometer readings for the year
- Total miles driven for the year
A paper logbook, spreadsheet, calendar-supported record, or mileage-tracking app may all be useful, as long as the records are complete and reliable.
Examples of Deductible Business Mileage
Business mileage may include trips such as:
- Driving from an office to a client site
- Traveling between job locations during the workday
- Visiting suppliers, vendors, or project locations
- Making business deliveries or pickups
- Driving from a qualifying home office to a client or customer location
- Attending meetings, training, or other qualifying business activities away from a regular work location
What Does Not Count as Business Mileage?
Commuting is generally not deductible. This includes regular travel between a taxpayer’s home and their primary or regular place of work.
A drive does not become deductible simply because someone makes work calls during the trip, carries tools in the vehicle, or has business signage on the car. Personal errands and personal vehicle use should also be kept separate from business miles.
For taxpayers who use one vehicle for both business and personal travel, maintaining a complete record of total miles driven can help establish the percentage of business use.
IRS Rules for Corporate Mileage Reimbursement
Many employers use the IRS mileage rate as a guideline when reimbursing employees who use a personal vehicle for business purposes. A clear reimbursement policy can help companies apply a consistent process for field staff, sales employees, technicians, project managers, and other team members who regularly travel for work.
The federal mileage rate is optional. Employers are not required to reimburse at 72.5 cents per mile, but the rate is commonly used when setting mileage allowances.
Accountable Plans and Tax Treatment
When an employer reimburses business mileage under an accountable plan, the reimbursement may generally be excluded from the employee’s wages when the arrangement meets applicable requirements.
An accountable plan requires:
- A business connection for the mileage reimbursement
- Timely substantiation of the business mileage
- Documentation of the date, destination, miles driven, and business purpose
- Return of any excess reimbursement when applicable
Mileage reimbursements at or below the federal standard rate may be treated as non-taxable income when the accountable plan requirements are met. Amounts that exceed the federal rate or do not satisfy accountable-plan rules may need to be treated as taxable wages.
A Note About Employer-Provided Vehicles and FAVR Plans
Businesses with employer-provided vehicles or fixed and variable rate plans (FAVR) may have additional considerations.
For 2026, the maximum standard automobile cost for FAVR plans is $61,700. The same amount applies to the fair market value limit for certain employer-provided vehicle valuation rules. These limits are separate from the general business mileage deduction available to self-employed taxpayers and businesses using a personal vehicle.
Get Help Reviewing Mileage Deductions and Reimbursement Policies in Raleigh-Durham
Mileage deductions and reimbursement policies can become more complicated when a vehicle is used for both personal and business purposes, employees travel regularly, or a company operates multiple vehicles. At Steward Ingram & Cooper, PLLC, our small business accountants work with business owners and individuals throughout the Greater Raleigh area. If you’re interested in becoming an ongoing client and would like assistance with record keeping, get in touch with us. As part of your month-to-month services, we can review and log your business records and keep you up to date of the IRS business mileage rate.
To inquire about our current capacity to take on new clients, please fill out the contact form on our website or call our office at (919) 872-0866.
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