This change impacts millions of business owners, freelancers and employers who track mileage for business-related driving. Here’s what the new rate means, who it affects and how to stay compliant.
The standard mileage rate is the amount the IRS allows taxpayers to deduct for each mile driven for business purposes.
Beginning January 1, 2026, the rates are:
72.5 cents per mile for business use (up 2.5 cents from 2025).
The IRS announced the update in its official bulletin, which you can review directly on the IRS website. The rates apply to cars, vans, pickups and panel trucks used for business. They apply to gasoline and diesel-powered vehicles, as well as fully electric and hybrid automobiles.
Each year, the IRS adjusts the mileage rate based on national cost data. The rates are adjusted to reflect updated cost data and annual inflation adjustments.
Some of the factors taken into consideration for adjustments include:
Rising operating expenses over the past year pushed the rate higher. In simple terms, it now costs more to operate a vehicle for business, and the IRS is acknowledging that reality.
The standard mileage rate is available to many, but not everyone. You can typically use it if you are:
A small business owner
A self-employed contractor or freelancer
An employee using your personal vehicle for business (when reimbursements apply)
A startup founder tracking early operating costs
However, you cannot use the standard mileage rate if:
You’ve used accelerated depreciation on the vehicle
You’ve claimed a Section 179 deduction on the vehicle
The IRS has specific rules regarding vehicle expense deduction methods to prevent “double-dipping” or inconsistent depreciation application. Depending on the method chosen, you might be locked into it for the life of that vehicle. Always confirm eligibility with a tax professional.
The IRS allows two methods for deducting vehicle expenses. Here’s how they compare.
You deduct the actual costs of operating the vehicle. This includes:
This actual expense method can result in a higher deduction, but it requires more detailed recordkeeping. Many small businesses prefer the standard rate because it’s easier to manage.
A 2.5-cent increase adds up quickly. Here’s a simple example.
If you drive 15,000 business miles in 2026:
2025 rate (70.0 cents): $10,500 deduction
That’s an extra $375 in deductions from the same driving mileage. For businesses with frequent travel, the difference can be meaningful.
You can’t claim the deduction without accurate records. The IRS requires documentation that includes:
Manually tracking mileage is error-prone and time-consuming. This can be overcome with automated mileage tracking. Automated mileage tracking can help to ensure every deductible mile is captured consistently.
Automatic mileage tracking has become widely accessible and easy to use. Many mobile apps track mileage using your phone’s GPS, recording trips in the background without manual input.
Common features include:
Some tools also allow notes to be added for business purpose documentation. This significantly reduces missed miles and manual errors, especially for frequent drivers.
To stay compliant, automatic tracking still requires user review. Recommended habits include:
Automation captures the data, but oversight ensures accuracy.
Many employers reimburse employees using the IRS standard mileage rate. With the 2026 increase:
Failing to align with the updated rate can create payroll and compliance issues.
The IRS raising the 2026 business mileage rate to 72.5 cents per mile provides a larger deduction for drivers. It reflects real-world cost increases and provides a larger deduction for business travel, but the value of the increase depends on accurate tracking and clean records.
Automatic tracking tools make it easier to capture every eligible mile while meeting IRS requirements.
With the right habits and records in place, the updated rate can translate into meaningful tax savings for the year ahead.