Unexpected Increase in Vehicle Standard Mileage Deduction
In a rare and unexpected move, and citing the increase in the cost of fuel, the IRS has just set and released a higher optional standard mileage rate used to calculate the deductible costs of operating an automobile for business for the remainder of calendar year 2026. This rate can also be used to reimburse employees for personal use of their own vehicles for business reasons.
Recall that if you use a vehicle for legitimate business endeavors, you can use the standard milage deduction in lieu of tracking actual vehicle expenses incurred in the operation of the vehicle. The standard mileage rate often results in a similar tax deduction to the use of actual expenses, without the need to keep receipts of such expenses. Using either method still requires keeping a record of the number of business miles driven versus the total of all miles driven during the year, both business and personal.
In IRS Announcement 2026-11, which modified previously issued IRS Notice 2026-10, the IRS revised the optional standard mileage rates for computing the deductible costs of operating an automobile for business, medical, or moving expense purposes and for determining the reimbursed amount of these expenses that is deemed substantiated.
The American Automobile Association has reported that the average price for regular gasoline was $2.819 a gallon back on January 8 but had risen to $3.890 on July 15. This increase of 38% led to the IRS's decision to change the standard mileage rates mid-year.
The revised standard mileage rates, retroactive to July 1, 2026, are as follows:
-76 cents per mile for business, an increase from 72.5 cents, and
-23.5 cents per mile for medical and moving purposes, up from 20.5 cents per mile for each.
The mileage rate that applies to the deduction for charitable contributions did not change, as it is fixed under Section 170(i) of the Internal Revenue Code at the low rate of 14 cents per mile.
The last midyear adjustment of the standard mileage rate was in 2022, so this is indeed a rare but taxpayer-friendly move on the part of the IRS.
