If you use your personal vehicle for business, there is an important midyear tax change you should know about.
The IRS increased the optional standard mileage rate for business driving from 72.5 cents to 76 cents per mile, effective July 1, 2026. The change reflects recent increases in fuel prices.
At first glance, this may look like a simple rate adjustment. But because the change occurred in the middle of the year, business owners must separate their 2026 mileage into two different periods.
2026 Mileage Rates at a Glance
| Purpose | Jan. 1–June 30, 2026 | July 1–Dec. 31, 2026 |
| Business use | 72.5 cents | 76 cents |
| Medical use | 20.5 cents | 23.5 cents |
| Qualified moving use | 20.5 cents | 23.5 cents |
| Charitable service | 14 cents | 14 cents |
The moving rate generally applies only to qualifying active-duty members of the Armed Forces and certain members of the intelligence community.
Why You Need to Separate Your Mileage
For 2026, you cannot simply multiply all annual business miles by one rate.
Suppose you drove:
- 4,000 qualifying business miles from January through June
- 3,000 qualifying business miles from July through December
Your deduction would be calculated as follows:
- 4,000 × $0.725 = $2,900
- 3,000 × $0.76 = $2,280
Your total standard mileage deduction would be $5,180.
Using 76 cents for the entire year would overstate the deduction. Using 72.5 cents for the entire year would understate it.
Employers that reimburse employees based on mileage should also update their reimbursement systems. The revised rate generally applies when both the employee’s transportation expense and the related mileage allowance occur on or after July 1, 2026.
Business Mileage Is Not the Same as Commuting
Not every mile driven during the workday is deductible.
Driving from your home to your regular workplace is generally considered personal commuting, even when you make business calls or think about work during the trip.
Qualifying business mileage may include travel:
- From your office to a client’s location
- Between two business locations
- To meet with a vendor or business adviser
- To purchase business supplies
- To attend a temporary work assignment or business event
Home-office rules can affect whether a trip begins as business travel, so the treatment may depend on whether the home office qualifies as your principal place of business.
Standard Mileage or Actual Expenses?
The standard mileage method is not the only way to calculate vehicle expenses.
Under the standard mileage method, you multiply qualifying business miles by the applicable IRS rate. Business-related parking fees and tolls may generally be deducted separately.
Under the actual expense method, you calculate the business portion of expenses such as:
- Gas and oil
- Insurance
- Repairs and maintenance
- Registration fees
- Lease payments
- Depreciation
The better method depends on the vehicle, operating costs and percentage of business use. However, taxpayers cannot freely switch methods in every situation. For example, an owned vehicle generally must use the standard mileage method in its first year of business use if the taxpayer wants to preserve the option of using that method later. Different rules apply to leased vehicles.
What Should Your Mileage Log Include?
A credit card statement or calendar appointment alone may not establish the business purpose of a trip.
A reliable mileage record should include:
- Date of the trip
- Starting point and destination
- Number of miles driven
- Specific business purpose
- Total annual mileage
- Business, commuting and other personal mileage
Records should be created at or near the time of each trip. Reconstructing an entire year from memory during tax season is much less reliable.
Mileage-tracking apps can help, but their reports should still clearly identify the business purpose of each trip. An automatically recorded route without a business explanation may not be enough.
What Small Business Owners Should Do Now
If you use the standard mileage method, review your records and make sure your bookkeeping system separates trips taken:
- Before July 1, 2026
- On or after July 1, 2026
Employers should also review mileage reimbursement policies and payroll or expense-reporting systems. If an employee reimbursement policy uses the IRS rate, the system should reflect the new 76-cent rate for qualifying mileage beginning July 1.
Our Perspective
The higher rate may provide a larger deduction or reimbursement, but the rate itself is only part of the calculation. The more important issue is whether the mileage qualifies as business travel and whether the records are sufficient to support it.
A small amount of recordkeeping throughout the year can prevent a much larger problem when the tax return is prepared—or when the IRS asks how the mileage deduction was calculated.
If you use a vehicle regularly for business, this is a good time to review your mileage log and reimbursement procedures rather than waiting until year-end.
This article provides general information and should not be considered individualized tax advice. Vehicle expense rules depend on the taxpayer’s circumstances and the method previously used.
Official IRS sources: IRS Announcement 2026-11, IRS Standard Mileage Rates, and IRS Topic No. 510: Business Use of Car.