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2026 Updated Mileage Rates: What Business Owners Need to Know

Continuing its annual tradition, the Internal Revenue Service (IRS) has released the adjusted mileage rates for 2026, reflecting inflation and changing costs. These rates guide business owners in calculating the deductible expenses when using a vehicle for business, charitable, medical, or moving purposes.

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Effective January 1, 2026, the new standard mileage rates applicable are as follows:

  • 72.5 cents per mile for business use, up from 70 cents in 2025. This rate incorporates a 35-cent-per-mile allocation for vehicle depreciation.

  • 20.5 cents per mile for medical or eligible moving expenses, a decrease from 21 cents in 2025.

  • 14 cents per mile for charitable service, unchanged, and statutorily fixed unless Congress legislates otherwise.

The business mileage rate is formulated after a comprehensive analysis of both fixed and variable costs associated with vehicle operation. In contrast, the medical and moving mileage rate focuses solely on variable expenses. It’s critical to note that costs linked to charitable service mileage have remained constant over the years due to statutory mandates.

While the Omnibus Budget Balancing and Budget Adjustment Act (OBBBA) eliminated moving expense deductions, exceptions are allowed for Armed Forces personnel under specific circumstances, and for intelligence community members relocated for assignment changes starting 2026. For those aiding charitable organizations, a detailed record of directly relevant out-of-pocket expenses (e.g., fuel, oil) offers an alternative to a straight mileage deduction. However, broader costs like general maintenance and insurance are not deductible.

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Key Considerations for Business Vehicle Usage – Business owners have the flexibility to choose between claiming actual vehicle expenses or using standard mileage rates. The specific choice can impact financial planning, especially with fluctuating fuel prices and varying depreciation allowances. It’s notable that certain tax advantages, like bonus depreciation, which had phased down to 40% by early 2025, were fully reinstated afterward but must be considered for cost-benefit analysis.

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Moreover, once a vehicle has been depreciated using MACRS, Section 179, or similar, via the actual method, reverting to standard mileage is prohibited for that vehicle. Furthermore, the mileage rate isn't applicable for hired vehicles or fleets exceeding four vehicles.

Business owners often overlook that tolls, parking fees, and vehicle property taxes paid during business usage can be deducted in addition to standard mileage.

Employer Reimbursement – If employers reimburse employees via standard mileage, substantiating details like time, location, distance, and business purpose ensures tax-free status for these reimbursements.

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Employee Vehicle Expenses – The Tax Cuts and Jobs Act suspended itemized deductions for employee expenses until 2025, with the OBBBA cementing their non-deductibility. Yet, select professionals, like reservists and performing artists, can claim travel deductions as income adjustments or itemized deductions, starting 2026. Educators can similarly deduct certain travel costs.

Self-employed Individuals – Self-employed taxpayers continue to enjoy deductions for business vehicle use, supplemented by deducting auto loan interest aligned with business usage on Schedule C.

Accelerated Write-offs for Heavy SUVs – SUVs over 6,000 pounds are not constrained by luxury auto depreciation limits. For these vehicles, leveraging Section 179 deductions up to $32,000 and bonus depreciation offers first-year tax savings, although disposing of the vehicle prematurely could necessitate recapture of Section 179 deductions.

Deciding the optimal approach for vehicle-related deductions can significantly impact your business’s tax efficiency. Reach out to our advisory team for clear guidance tailored to your specific context.

Gain Year-Round Financial Clarity and Confidence
Partner with Lizza & Carullo CPAs & Advisors for ongoing guidance, proactive tax planning, and strategic financial support. Whether you’re growing a business or navigating personal taxes, our year-round advisory approach helps you stay organized, tax-efficient, and in control — with a team that’s here when you need us, not just at tax time.
Schedule Your Discovery Call
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