2026 Business Mileage Deduction: New IRS Rate Explained

If you drive a vehicle for business, there’s a meaningful update for tax year 2026 you need on your radar. The IRS has just raised the standard mileage rate for business use to 72.5 cents per mile, up from 70 cents last year. This change affects how you calculate your mileage deduction and employee reimbursements for 2026. 

Let’s break down what this means for you and how to put it to work.

What Exactly Changed

Starting January 1, 2026, the IRS mileage rate you can use to calculate your deduction or reimbursable business travel:

72.5 cents per mile for business driving. 

That rate applies to all common business vehicles you might use, including:

• Cars, vans, pickups, panel trucks
• Gas, diesel, hybrid, and electric vehicles

It’s optional. You can choose between:

Actual cost method (potentially more tax-efficient but more complex)  

Standard mileage rate (simplest)

Why the Update Matters for Business Owners


This is more than just a cents-per-mile headline. Every mile your team drives for sales calls, client meetings, deliveries, or service calls translates directly into deductible expense or reimbursable cost. A bump from 70¢ to 72.5¢ doesn’t seem huge on paper, but it adds up fast:

• 1,000 business miles = $725 deduction
• 2,000 miles = $1,450 deduction

That extra 2.5¢ alone adds $25 per 1,000 miles in deductible value. Stretch that across a fleet or heavy travel year and it becomes real d

Standard Mileage vs. Actual Expense

Here’s the tradeoff decision:

Standard Mileage Rate (72.5¢)

• Easiest to calculate
• No tracking of gas, oil changes, repairs
• Just log miles

Actual Expense Method

• Track fuel, insurance, maintenance, depreciation
• Works better if your vehicle costs exceed the standard rate
• Harder recordkeeping

For most small business owners who aren’t tracking every car expense, the standard mileage rate will remain the simplest, most effective route. But if you run high-cost vehicles or a fleet, run the numbers both ways before filing.

Recordkeeping Still Matters

Your deduction only works if you can substantiate it. The IRS expects a contemporaneous mileage log that includes:

• Date
• Starting point and destination
• Business purpose
• Miles driven

Old scribbled notes or annual reconstructions aren’t IRS-audit proof. Automate your mileage tracking with an app or GPS tool to protect the deduction and save time. 


Tips for Small Business Owners

Here’s how to maximize the update:

1. Switch to real-time mileage logging now
   Investing in automatic tracking eliminates manual error and builds audit-ready records.
2. Set or update reimbursement policies
   If you reimburse employees, align your books with the 72.5¢ rate for 2026 to avoid taxable fringe issues.
3. Check before choosing actual costs
   For high-maintenance vehicles, run a comparison to confirm the standard rate still wins.
4. Train your team
   Make sure they understand what qualifies (business trips) vs what does not (commute miles).

Bottom Line

For 2026, the IRS mileage deduction just got more generous. The standard rate is 72.5¢ per mile for business travel, giving small business owners a straightforward way to claim vehicle costs. Track it properly and you can secure meaningful tax savings without the bookkeeping burden of actual expenses. 

FAQ

What is the business mileage rate for 2026?

The IRS business mileage rate for 2026 is 72.5 cents per mile for qualifying business travel.

Does the 2026 mileage rate apply to electric vehicles?

Yes. The standard mileage rate applies to gas, hybrid, and electric vehicles used for business.

Can I deduct commuting miles in 2026?

No. Commuting between home and your regular workplace is not deductible.

Do I need receipts if I use the mileage method?

You do not need gas or repair receipts, but you must keep a detailed mileage log.

Should I use actual expenses instead of mileage?

Actual expenses may make sense for high-cost vehicles, but most small business owners benefit from the standard mileage rate.