Business Deduction Standard Mileage Rates Rise for 2026
Many of us use our vehicles regularly, either for business purposes or in the service of charitable organizations. When that happens, assuming the usage has a legitimate business or charitable purpose AND the use is substantiated as required by law, then a tax deduction may be allowed.
You can always use actual expenses in operating the vehicle as a basis for your deductions, but that requires extra recordkeeping. So, in lieu of tracking actual expenses incurred in the operation of the vehicle, the IRS provides a standard per-mile rate you can use instead.
For 2026, the IRS says it has increased the optional standard mileage rate used to calculate the deductible costs of operating a vehicle for business to 72.5 cents per mile driven, up from 70 cents per mile in 2025. The increased rate is effective as of January 1, 2026, so you can begin using it retroactive to that date.
The annual IRS adjustment sets the 2026 standard mileage rates at 20.5 cents per mile driven for medical or moving purposes for qualified active-duty members of the armed forces. Not sure why, but this rate is lower than last year.
If you use your vehicle for charitable pursuits, the rate per mile driven in service of charitable organizations is still 14 cents. This rate is set by statute and, as a resul,t hasn’t been changed in many years.
The use of the standard mileage rate is the same regardless of what kind of vehicle you drive. By that I mean, the same rates apply whether the vehicle is gasoline-powered, diesel-powered, or is electric or hybrid-electric.
For business driving, part of the mileage rate is considered depreciation that reduces the tax basis of the vehicle. The portion of the business standard mileage rate that is treated as depreciation for 2026 is 35 cents per mile, up 2 cents from 2025. This is important because if you sell or trade your vehicle, you potentially could have a taxable gain on the exchange, depending on how much your cost basis has been reduced by the depreciation allowance.
The IRS also provided the maximum standard automobile cost under a fixed-and-variable-rate (FAVR) plan of $61,700 for automobiles (including trucks and vans), which is up $500 from 2025. Under a FAVR plan, a standard amount is deemed substantiated for an employer's reimbursement to employees for expenses they incur in driving their vehicle in performing services as an employee for the employer.
While probably of limited relevance to readers of this space, some businesses with fleets of vehicles use what is known as the fleet-average value rule. For purposes of this rule in Regs. Sec. 1.61-21(d)(5)(v) and the vehicle cents-per-mile rule under Regs. Sec. 1.61-21(e), $61,700 is also the maximum fair market value of automobiles (including trucks and vans) first made available in calendar year 2026.
Happy driving in 2026! As they say, let’s keep it between the ditches!
