IRS Raises the 2026 Standard Mileage Rate Midyear: What Business Owners Need to Know

The Internal Revenue Service Washington D.C. headquarters

Whether you view it as welcome tax relief or another administrative update, the Internal Revenue Service has increased the optional standard mileage rate for the second half of 2026.

The change affects self-employed individuals and business owners who use the standard mileage method to calculate vehicle expenses. It may also affect employers that use the IRS rate to reimburse employees who drive their personal vehicles for business.

What Changed with the Standard Mileage Rate?

In Announcement 2026-11, the IRS increased the optional standard mileage rates for business, medical, and qualifying moving travel beginning July 1, 2026.

The applicable rates for 2026 are:

Type of mileage	January 1–June 30	July 1–December 31
Business	72.5 cents per mile	76 cents per mile
Medical and qualifying moving	20.5 cents per mile	23.5 cents per mile
Charitable	14 cents per mile	14 cents per mile

The charitable mileage rate remains unchanged because it is set by federal law rather than adjusted administratively by the IRS.

According to the IRS, the midyear adjustment was made in response to recent increases in fuel prices. Although midyear changes are unusual, this is not the first time the IRS has made one. A similar adjustment took effect on July 1, 2022, following another period of rising fuel costs.

Who Is Affected?

This change may affect you if you are:

• A self-employed individual who deducts business mileage;

• A small business owner who uses a personal vehicle for business;

• An employer who reimburses employees for business use of their personal vehicles; or

• An employee responsible for submitting business mileage to an employer.

The higher rate is not retroactive to January 1. Business mileage from January 1 through June 30, 2026, remains subject to the 72.5-cent rate. Business mileage on or after July 1 qualifies for the new 76-cent rate.

For example, 1,000 qualifying business miles driven after July 1 would produce a $760 deduction or reimbursement using the new rate, compared with $725 under the original rate.

Do You Need Two Mileage Logs?

You do not necessarily need to create an entirely separate mileage log. However, your records must clearly identify the date of each trip so that mileage can be divided between the two periods.

A complete mileage log should generally include:

• The date of the trip;

• The starting point and destination;

• The business purpose of the trip; and

• The number of business miles driven.

Mileage records should be maintained at or near the time the travel occurs. Waiting until tax season to reconstruct an entire year of travel can lead to missing information, inaccurate deductions, and difficulty supporting the expense if the IRS requests documentation.

Business owners should make sure their mileage-tracking applications, spreadsheets, bookkeeping systems, and year-end tax records apply the correct rate based on the date of travel.

What Should Employers Do?

Employers that use the IRS standard mileage rate as their reimbursement benchmark should review their reimbursement policies and update their systems for qualifying travel occurring on or after July 1.

The date of the underlying travel matters. For example, mileage driven in June does not qualify for the new rate merely because the employee submits the reimbursement request or receives payment in July. The revised rate generally applies when both the travel occurred on or after July 1 and the mileage allowance was paid on or after that date.

Employers should also communicate the change to employees, managers, payroll personnel, and anyone responsible for approving expense reports.

The IRS rate is optional. Federal law does not generally require every employer to reimburse employees at the IRS rate or to reimburse mileage at all. However, an employment agreement, company policy, or applicable state law may impose separate reimbursement requirements. Employers should review those requirements before changing their policies.

What Should Self-Employed Individuals Do?

Self-employed individuals using the standard mileage method should continue tracking all qualifying business travel and make sure their records separate mileage into the following periods:

• January 1 through June 30, 2026; and

• July 1 through December 31, 2026.

  
  

The standard mileage method is optional. Depending on the vehicle and how it is used, a taxpayer may instead qualify to deduct the business portion of actual vehicle expenses, such as fuel, repairs, insurance, registration costs, lease payments, or depreciation. Eligibility to switch between methods can depend on how the vehicle was treated when it was first placed in service, so taxpayers should consult their tax professional before making a change.

The Bottom Line

The midyear rate increase may provide a modest benefit to business owners and self-employed individuals who spend significant time on the road. However, receiving that benefit depends on maintaining accurate records and applying the correct rate to each trip.

Employers should update their reimbursement procedures, while self-employed individuals should confirm that their mileage logs clearly distinguish travel before and after July 1. A few minutes spent reviewing your records now can prevent confusion, and potentially missed deductions, when it is time to prepare your 2026 tax return.

If you have questions about business vehicle expenses, employee mileage reimbursements, or whether the standard mileage method is appropriate for your situation, contact Pathfinder Accounting & Tax. We can help you understand the rules and make sure your business records are prepared for tax season.

This article is intended for general informational purposes and does not constitute individualized tax or legal advice.