IRS Mileage Rate 2026: 72.5¢ Then 76¢ — The Mid-Year Increase Explained

1. The two 2026 rates and why they changed

The IRS raised H2 rates “to reflect the rising cost of fuel in 2026.” Mid-year rate changes are rare — the last one was July 2022, when business went from 58.5¢ to 62.5¢.

2. Full IRS standard mileage rate table

*Moving rate applies only to active-duty Armed Forces under PCS orders plus certain intelligence-community members. OBBB made the TCJA suspension for everyone else permanent.

3. How split-year deduction math works

For each period the deduction is simply miles × rate. In 2026 you run two calculations for business and medical miles and add them together.

Ignoring the split and using a flat 76¢ overstates the deduction by $350. Ignoring it and using a flat 72.5¢ understates it by the same. Split the year.

4. Who can actually deduct mileage

5. Employer reimbursements and accountable plans

An accountable plan reimburses employees for business mileage tax-free up to the IRS rate. Since W-2 employees can’t deduct mileage themselves, an accountable plan is the only way most employees get value from business driving.

• Reimbursements at or below the IRS rate: tax-free to the employee, deductible to the employer.
• Reimbursements above the IRS rate: excess is taxable wages, subject to withholding and FICA.
• Employers should switch rates July 1, 2026 — H1 trips at 72.5¢, H2 trips at 76¢. Require date-stamped mileage logs on expense reports.
• A fixed monthly car allowance without substantiation is fully taxable wages — not an accountable plan.

6. Military moving miles (PCS orders)

Active-duty members of the Armed Forces moving under a Permanent Change of Station order — and certain intelligence-community members — can still deduct moving miles: 20.5¢ H1 and 23.5¢ H2 in 2026. Report on Form 3903. All other moving-expense deductions were suspended by TCJA and made permanent by OBBB.

7. Standard mileage vs. actual expenses

The standard rate bundles fuel, maintenance, insurance, depreciation, and registration into a single per-mile number. Actual expenses tracks each item separately and can win for expensive vehicles or very heavy business use.

The 2026 business rate includes a 35¢/mile depreciation component (Notice 2026-10). That amount reduces your vehicle’s basis for the eventual sale.

Frequently asked questions

Why did the IRS mileage rate change mid-year in 2026?

IRS Announcement 2026-11 (2026-29 I.R.B. 49) raised the business, medical, and PCS-moving standard mileage rates effective July 1, 2026, to reflect the rising cost of fuel in 2026. The business rate went from 72.5¢ to 76¢. The last mid-year change was 2022. The charitable rate did not move because it's fixed by statute at 14¢ (26 U.S.C. §170(i)).

Which rate do I use for a trip in July 2026?

The H2 rate. Any business mile driven on or after July 1, 2026 uses 76¢/mile; medical and PCS-moving miles use 23.5¢/mile. Miles driven on June 30 or earlier still use the H1 rate (72.5¢ / 20.5¢). Log the trip date so you can split the year cleanly.

Can W-2 employees deduct mileage in 2026?

No — outside three narrow exceptions. TCJA suspended the itemized deduction for unreimbursed employee business expenses, and OBBB (P.L. 119-21) made the suspension permanent. Armed Forces reservists, qualified performing artists, and fee-basis state or local government officials can still deduct via Form 2106. Everyone else needs an employer accountable-plan reimbursement.

Do electric vehicles get the same standard mileage rate?

Yes. The IRS standard mileage rate applies equally to gas, hybrid, and fully electric vehicles. If your actual operating costs are unusually high (or low), compare against the actual-expense method — but for a car you own, you must use the standard rate in the first year the car is available for use in your business to keep the option to switch (for a leased car, for the whole lease).

How does an employer switch mileage reimbursement rates on July 1?

Employers running an accountable plan should update their reimbursement policy effective for trips on or after July 1, 2026. Reimbursements at or below the IRS rate are tax-free to the employee; anything above the IRS rate is taxable wages. A common approach is to reimburse H1 trips at 72.5¢ and H2 trips at 76¢ and require date-stamped mileage logs on submitted expense reports.