Business standard mileage rate increases for 2026

The IRS increased the optional standard mileage rate used to calculate the deductible costs of operating a vehicle for business to 72.5 cents per mile driven, up 2.5 cents from 2025. The increased rate was effective as of Jan. 1, 2026 (Notice 2026-10).

The notice sets the 2026 standard mileage rate at 20.5 cents per mile driven for medical purposes, down a half cent from 2025. The rate is 20.5 cents per mile driven for moving purposes for certain active-duty members of the armed forces and also for certain members of the intelligence community, which is also down a half cent from last year. For driving in service of charitable organizations, the rate is 14 cents per mile, the same as it was in 2025.

The rates apply to fully electric and hybrid automobiles, as well as gas- and diesel-powered vehicles.

While the mileage rate for charitable use is set by statute, the mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on only the variable costs from the annual study, an IRS news release dated Dec. 29 said.

The portion of the business standard mileage rate that is treated as depreciation for purposes of calculating reductions to basis will be 35 cents per mile for 2026, up 2 cents from 2025.

Taxpayers can calculate the actual costs of using their vehicle rather than using the standard mileage rates.

Notice 2026-10 also provides the maximum standard automobile cost under a fixed-and-variable-rate (FAVR) plan of $61,700 for automobiles (including trucks and vans), an increase of $500 from 2025. Under a FAVR plan, a standard amount is deemed substantiated for an employer’s reimbursement to employees for expenses they incur in driving their vehicle in performing services as an employee for the employer.

For purposes of the fleet-average valuation rule in Regs. Sec. 1.61-21(d)(5)(v) and the vehicle cents-per-mile rule under Regs. Sec. 1.61-21(e), $61,700 is also the maximum fair market value of automobiles (including trucks and vans) first made available to employees in calendar year 2026.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.