Suggested: business owner updating a mileage log and vehicle expense spreadsheet at a desk.
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Tax
IRS Changes Standard Mileage Rates Effective July 1, 2026
Update mileage logs, accountable plans, and vehicle expense policies now — a four-step action list for businesses and their advisers
Effective July 1, 2026, the IRS raised the business mileage rate to 76 cents per mile (medical/moving to 23.5 cents); the charitable rate stays fixed at 14 cents. The change isn’t retroactive — split calculations at July 1, and confirm which employees can still use the rate post-OBBBA.
Midyear changes to the IRS standard mileage rate are rare enough that most businesses’ expense systems aren’t built to expect one. The IRS raised the rate anyway, in Announcement 2026-11, modifying the rates originally set in Notice 2026-10.
The trigger was fuel prices: the national average for regular gasoline rose from $2.819 a gallon on January 8 to $3.890 a gallon by mid-July — a 38% increase — pushing the cost of operating a vehicle well above what the original rate assumed.
For businesses that reimburse mileage, track vehicle expenses, or advise clients, this isn’t a rate to note and move on from. It changes what mileage logs capture, and — because of a separate law change — who can even use the standard rate as a deduction.
1. What Changed, and Why
Two of the three standard mileage rates increased for the second half of 2026; the third is fixed by law and didn’t move:
2026 Standard Mileage Rates
| Purpose | Jan. 1 – Jun. 30, 2026 | Jul. 1 – Dec. 31, 2026 |
|---|---|---|
| Business | 72.5 cents/mile | 76 cents/mile |
| Medical & moving* | 20.5 cents/mile | 23.5 cents/mile |
| Charitable | 14 cents/mile (fixed by statute) | 14 cents/mile (unchanged) |
*The moving-expense rate applies only to Armed Forces members moving under military orders and certain intelligence community members; the moving expense deduction is otherwise suspended.
Of the 76-cent business rate, 35 cents per mile is treated as depreciation for purposes of reducing a vehicle’s basis — relevant for anyone tracking gain or loss on a business vehicle that used the standard mileage method.
2. Not Retroactive: Two Rates Apply to 2026
The new rates apply only to mileage paid or incurred on or after July 1, 2026; mileage from the first half of the year still uses the original rates in Notice 2026-10. A full-year 2026 calculation needs two rates, not one, split at the July 1 cutoff.
Don’t apply 76 cents to miles driven in January through June 2026. Mileage logs need a clean split at July 1 so the correct rate is used for each period — most expense software requires this to be configured manually rather than applied automatically.
3. Who Can Actually Use the Business Rate
The standard mileage rate is often described as a personal deduction, but for most W-2 employees that’s no longer accurate. The One, Big, Beautiful Bill Act (OBBBA) disallowed the itemized deductions unreimbursed travel fell into, so most employees can no longer deduct unreimbursed mileage on Schedule A.
A narrow set of taxpayers can still deduct unreimbursed mileage as an adjustment to income: reserve-component Armed Forces, fee-based government officials, performing artists, and eligible educators. Everyone else needs employer reimbursement.
The rate remains fully available to the self-employed, independent contractors, and businesses computing their own vehicle expense deductions — the OBBBA change targeted unreimbursed employee expenses specifically, not business use generally.
4. Accountable Plans: Reimbursing at the New Rate
Because unreimbursed mileage is a dead end for most employees now, accountable plan reimbursement matters more. Mileage reimbursed at or below the IRS rate is excluded from the employee’s wages if the plan meets three conditions:
- The expense has a business connection.
- The employee substantiates it (date, mileage, business purpose — typically via a log).
- Any excess reimbursement is returned within a reasonable time.
Reimbursing above the current IRS rate doesn’t automatically break the plan, but the excess over the standard rate is treated as wages, subject to income and payroll tax, unless the employer substantiates the higher amount with actual expense records instead of the standard mileage method.
Four Steps to Take Now
Businesses and their advisers should treat this as an immediate update, not a year-end cleanup item.
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Bottom Line
A midyear mileage rate change is easy to treat as a minor update — but it isn’t this year. It lands on top of a separate law change that already shifted who can deduct unreimbursed mileage, giving accountable plans, payroll, and expense policy more weight than before.
Businesses that update their systems and policies now avoid both an under-the-rate compliance gap and a July-through-December reimbursement rate that’s simply wrong.
How PNJ Can Help
PNJ helps businesses update accountable plan documentation, payroll and expense-system configuration, and vehicle expense policies to reflect rate changes like this one — and helps individual clients understand exactly where they stand on mileage deductions after the OBBBA changes.
Sources and Professional Notes
- Internal Revenue Service, Announcement 2026-11 (modifying Notice 2026-10), Internal Revenue Bulletin 2026-29.
- Internal Revenue Service, Notice 2026-10, “2026 Standard Mileage Rates,” irs.gov.
- Journal of Accountancy, “IRS raises standard mileage rates for remainder of 2026,” July 15, 2026.
Disclaimer
This material is for general informational purposes only and does not constitute accounting, tax, or legal advice. Application of the standard mileage rates, accountable plan rules, and the OBBBA’s deduction limits depends on an entity’s or individual’s specific facts. This article is a general summary and is not a substitute for reviewing IRS Announcement 2026-11 and Notice 2026-10 directly or obtaining advice based on specific circumstances. Consult qualified advisers before changing reimbursement policies or filing positions.