Higher Fuel Costs Spark IRS Mileage Rate Change

The IRS has made a rare midyear adjustment to the standard mileage rate used to calculate the deductible costs of operating an automobile for business purposes.

Effective July 1, 2026, the standard rate for business vehicle use is 76 cents per mile, up 3.5 cents from the rate that went into effect Jan. 1.

In a July 13 bulletin, the IRS noted that the change “results from recent increases in the price of fuel.” The last time the agency altered the mileage rate during a calendar year was in 2022.

Deductions for medical and moving purposes will rise to 23.5 cents per mile, up from the previous rate of 20.5 cents.

The rate for charitable used is fixed by federal law at 14 cents per mile and has not changed.

The new rates, which apply to electric and hybrid-electric vehicles and gasoline and diesel-powered vehicles, are scheduled to remain in effect through year-end.

Requirements

Taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses.

Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces or a certain member of the intelligence community moving under orders to a change of station or assignment.

If taxpayers chose to use standard mileage rates, they must opt to do so in the first year the car is available for business use.

If taxpayers chose to use standard mileage rates, they must opt to do so in the first year the car is available for business use. They can choose either the standard mileage rate or actual expenses in the years that follow.

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

Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.