Business & Financial Solutions
TAX HELP SERVICE AND PREPARATION
The IRS has raised the business standard mileage rate to 72.5 cents per mile for 2026, up 2.5 cents from 2025. On 15,000 business miles that is roughly $375 in extra deductions without changing a single thing about how you run your business.
The business rate was not the only change, though, and one of the others moved in the opposite direction. Here is what the 2026 rates are, what shifted, and how to make sure the deduction actually survives scrutiny.
The IRS sets optional standard mileage rates each year based on a study of what it actually costs to own and operate a vehicle. For 2026, the rates effective January 1 are:
| 2026 Mileage Purpose | IRS Standard Rate |
|---|---|
| Business | 72.5 cents per mile |
| Medical | 20.5 cents per mile |
| Moving (active-duty military and certain intelligence community members) | 20.5 cents per mile |
| Charitable | 14 cents per mile |
These rates apply to cars, vans, pickups and panel trucks, including fully electric and hybrid vehicles as well as gasoline and diesel.
Most years the rates move together. In 2026 they did not:
| Purpose | 2025 Rate | 2026 Rate | Change |
|---|---|---|---|
| Business | 70 cents | 72.5 cents | +2.5 cents |
| Medical | 21 cents | 20.5 cents | -0.5 cents |
| Moving (military / intelligence) | 21 cents | 20.5 cents | -0.5 cents |
| Charitable | 14 cents | 14 cents | No change |
The split comes down to what each rate measures. The business rate reflects both fixed and variable costs of operating a vehicle, so depreciation, insurance and maintenance all feed into it, and those have kept climbing. The medical and moving rates count only variable costs like fuel and oil, and those eased slightly. The charitable rate is set by statute rather than by cost study, so it does not move at all.
In practical terms, a business owner driving 15,000 miles a year goes from a $10,500 deduction in 2025 to $10,875 in 2026. You can see how this compares with prior years in our breakdown of the 2025 IRS mileage rate.
You have two ways to deduct vehicle costs. The standard mileage rate multiplies your business miles by the IRS rate, which is simple and requires far less documentation. The actual expense method tracks every cost, including fuel, repairs, insurance, registration, lease payments and depreciation, then applies your business-use percentage.
Timing rules matter more than most owners realize. If you own the vehicle and want the standard rate, you must choose it in the first year the car is available for business use; after that you can switch year to year. For leased vehicles the rule is stricter, and once you pick the standard rate you must keep it for the entire lease, renewals included.
Not sure you are capturing the full mileage deduction? Our CPA team works with business owners across Maryland, Virginia and Texas. Talk to us about whether the standard rate or actual expenses saves you more, and how vehicle costs fit into your quarterly tax planning. Contact BFS or explore our accounting & bookkeeping services.
Self-employed individuals, sole proprietors and business owners deduct business mileage directly against business income. For W-2 employees the picture is narrower: taxpayers generally cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses, with an exception for certain educator expenses.
Some deductions do survive above the line, including those for certain reserve-component members of the Armed Forces, certain state and local government officials, certain performing artists and eligible educators. Moving-expense mileage remains limited to active-duty military relocating under permanent change of station orders and, new for 2026, certain members of the intelligence community.
If you employ drivers, the cleanest answer is an accountable reimbursement plan. Reimbursing at or below the IRS standard rate keeps the payment untaxed for the employee and free of payroll tax for the company.
The IRS expects contemporaneous records, meaning you log trips as they happen rather than reconstructing the year from memory each April. Each entry should capture the date, starting point, destination, business purpose and miles driven. Most owners find a GPS-based app removes the friction entirely.
Keep those records at least three years after filing the return that claims the deduction. And remember that commuting between home and a regular workplace is personal mileage, not business mileage, though trips from a qualifying home office to client sites generally do count.
Q: Can I switch between the standard rate and actual expenses?
A: For an owned vehicle, yes, provided you used the standard mileage rate in the first year the car was available for business. For a leased vehicle you must stay with your original choice for the full lease term.
Q: Do the 2026 rates apply to electric and hybrid vehicles?
A: Yes. The rates cover fully electric and hybrid automobiles on the same terms as gasoline and diesel vehicles.
Q: What if I use the same vehicle for business and personal driving?
A: Only the business portion is deductible. Track total miles and business miles, then apply that percentage to whichever method you use.
Mileage is one line on a much larger return. At Business and Financial Solutions we work with owners across Frederick, Rockville, McLean and Plano to make sure the deduction method fits the vehicle, the records hold up under review, and vehicle purchases are timed sensibly against the rest of the tax picture.
Ready to see what the 2026 rate means for your situation? Contact BFS to talk it through, or learn more about our tax preparation and planning services.
