January 5, 2026

2026 Mileage Rates: Key Updates for Tax Planning

In its annual update, the Internal Revenue Service has released the inflation-adjusted standard mileage rates for 2026, crucial for taxpayers calculating deductible costs of operating an automobile. Whether you're using a vehicle for business, charitable activities, medical, or specific relocations, these new rates are pivotal for strategic tax planning.

Starting January 1, 2026, the standard mileage rates for the use of a car, van, pickup, or panel truck are:

72.5 cents per mile for business travel, inclusive of a 35-cent-per-mile component for depreciation. This is an increase from 70 cents per mile in 2025.
20.5 cents per mile for medical purposes and certain moving expenses, reflecting a decrease from 21 cents in 2025.
A stable 14 cents per mile for service to charitable organizations.

The business mileage rate is calculated annually based on fixed and variable costs of automobile operations. Medical and moving rates focus on variable costs. Meanwhile, the charitable mileage rate remains fixed by law and has not changed in over 25 years.

It's critical to note that the OBBBA permanently disallowed moving-related mileage expenses, with exceptions for active-duty Armed Forces members moving due to military orders and, starting 2026, intelligence community members relocating due to assignment changes.

For charitable mileage, taxpayers can alternatively deduct the cost of gas and oil using itemized deductions, but not general vehicle upkeep such as repairs or insurance.

Key Considerations for Business Vehicle Users

While the standard mileage rate offers simplicity, detailed tracking of actual costs could be advantageous, particularly with fluctuating fuel prices and variable depreciation benefits, like bonus depreciation. The phased reintroduction of 100% bonus depreciation in 2025 underscores strategic opportunities for using the actual expense method within specific tax contexts.

Remember, once the actual method with Section 179 or MACRS depreciation is used, you cannot revert to the standard rates for that vehicle. The standard rate is likewise unsuitable for vehicles used for hire or more than four vehicles at a time.

Additional to the mileage rate, don't overlook deducting parking, tolls, and property taxes paid for business vehicles.

Employer Reimbursement Policy

For employees reimbursed using the standard mileage rate, it's critical that mileage and travel specifics are substantiated per IRS regulations. This ensures tax-free reimbursement for substantiated costs.

Employee and Self-employed Vehicle Deductions

The Tax Cuts and Jobs Act ceased unreimbursed employee deductions, but certain professions remain eligible for travel expense deductions as income adjustments. This includes reserve Armed Forces, certain government officials, and educators, among others. Self-employed individuals can still fully deduct vehicle expenses proportionate to business use, including auto loan interest.

Opportunities with Heavy SUVs

For owners of SUVs exceeding 6,000 pounds, significant tax deductions are available due to the absence of luxury auto depreciation limits. These vehicles qualify for both Section 179 deductions (up to $32,000 in 2026) and bonus depreciation, contingent on vehicle service life. Tax impacts of early disposition should be carefully planned, especially for those leveraging Section 179.

For personalized advice on vehicle deduction methods or documentation needs, contact our expert team directly at Thomas Hawbaker CPA PLLC. Our extensive experience ensures we stay ahead in delivering optimized tax strategies.

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