2026 Mileage Deduction Rates: Key Updates for Businesses

The Internal Revenue Service (IRS) has released the much-anticipated 2026 inflation-adjusted standard mileage rates. These optional rates are pivotal for calculating the deductible costs associated with operating a vehicle for various purposes including business, charitable, medical, and moving expenses.

Effective January 1, 2026, the standard mileage rates applicable for the use of cars, vans, pickups, or trucks are as follows:

For business purposes, the rate is set at 72.5 cents per mile, which comprises a 35-cent-per-mile allocation for depreciation. This marks an increase from the 70 cents per mile rate noted in 2025.
For medical and specific moving scenarios, the rate is 20.5 cents per mile, decreasing slightly from 21 cents per mile in the previous year.
The mileage rate for services to charitable organizations remains statutorily set at 14 cents per mile, a rate unchanged for over 25 years.

The business mileage rate reflects an annual assessment of both fixed and variable costs tied to vehicle operation. In contrast, the rates for medical and moving expenses are based solely on variable costs, while the charitable rate is governable only by legislative action.

Notably, the Once Big Beautiful Bill Act (OBBBA) permanently disallowed moving mileage expenses, except for active-duty military personnel relocating under orders and intelligence community members requiring relocation due to assignment changes.

For individuals using personal vehicles in charitable activities, besides the mileage method, there’s the option to deduct actual expenses directly related to fuel and oil, although costs of maintenance, repairs, insurance, and others remain non-deductible.

Business Vehicle Usage Insights – Taxpayers can elect to calculate exact costs incurred for business vehicle use as an alternative to standard mileage rates. Due to fluctuating fuel costs and enhanced depreciation perks like the bonus depreciation, choosing actual expense calculation can be advantageous, especially within a vehicle’s first operational year for business.

Post-2022, bonus depreciation phased down to 40% until January 2025, but it was reinstated to 100% for the remainder of 2025. Amendments in depreciation rules affect eligibility to switch back to standard mileage rates once actual expense methods like Section 179 or MACRS are used.

It’s vital for business owners to note that tolls and parking fees, alongside state and local vehicle property taxes tied to business use, can be deducted in addition to the mileage rate.

Employer Reimbursement – Any employer reimbursement to employees based on the standard mileage method remains tax-free, contingent on comprehensive reporting of travel specifics by employees.

Challenges for Employee Vehicle Expenses – Changes under the Tax Cuts and Jobs Act and the OBBBA render employee vehicle expenses non-deductible through 2025, with few exceptions. Eligible parties like Armed Forces reservists, certain government officials, performing artists, and eligible educators may still deduct certain unreimbursed expenses under specific conditions.

Self-Employed Opportunities – Independent contractors and sole proprietors can still deduct vehicle business use via either expense type, and can also claim interest paid on vehicle loans proportionate to business use on Schedule C.

Maximizing Write-Offs on Heavy SUVs – Vehicles over 6,000 pounds escape luxury auto depreciation limits, affording lucrative tax breaks through Section 179 and bonus depreciation up to $32,000, provided the gross unloaded vehicle weight doesn’t exceed 14,000 pounds. However, businesses should be wary of potential recaptures if assets are sold within five years.

For detailed strategies on maximizing vehicle usage deductions and maintaining the required documentation, feel free to reach out for advice.

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