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Your company’s vehicle-use and travel reimbursements rely on the IRS’s standard mileage rate. This annual figure, often referred to as the IRS mileage rate, defines how many cents per mile you may reimburse an employee (or deduct as a self-employed individual) for using a personal vehicle for business, medical, moving, or charitable purposes.
As we look ahead to 2026, the IRS mileage rate becomes important for employers, self-employed individuals, and employees.
For employers, it’s time to review and update your expense reimbursement policy so that your payroll and accounting systems won’t lag behind the new rate and expose your organization to tax inefficiencies or exposure.
For self-employed professionals and contractors, the upcoming rate influences how you report and claim vehicle expenses on Schedule C (or equivalent).
And for employees who drive personal cars for business tasks, it shows whether your reimbursement strategy aligns with real-world costs, or leaves you under-reimbursing or triggering taxable income for staff.
This article discusses the anticipated changes to the 2026 IRS mileage rate; what that means for your expense-reimbursement policy; how to calculate and administer mileage payments accurately; what self-employed taxpayers must know; and the steps to update your policy before January 1 to stay compliant.
What Is the IRS Mileage Rate?
The IRS standard mileage rate is a per-mile figure set annually to simplify how businesses, self-employed individuals, and employees calculate vehicle-use costs for business and other eligible purposes.
This rate reflects how much it costs to own and operate a vehicle for a given purpose, and when multiplied by miles driven, it becomes the basis for mileage reimbursement or tax deductions.
When an employee uses a personal vehicle for business travel, or a self-employed person drives for income-producing activities, the standard mileage rate offers an easy, IRS-approved way to calculate reimbursement without tracking every individual cost.
According to one of our blog posts, businesses can include mileage as a reimbursable expense in their policies and simplify record-keeping by aligning with the IRS rate.
The purpose of the rate is both tax-compliance and administrative convenience: it sets a benchmark for deductible mileage and helps employers design reimbursement policies that won’t trigger taxable income for employees.
How the IRS Determines the Annual Rate
The IRS declares each year’s standard mileage rate after examining the fixed and variable costs of owning and driving an automobile. According to the IRS, the standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile.
Variable costs include fuel, oil changes, tire wear, repairs, and maintenance. Fixed costs cover depreciation, insurance, registration, and taxes. The rate thus reflects both short-term operating expenses and long-term ownership costs.
For example, in 2025, the business mileage rate increased to reflect rising depreciation and insurance costs.
The Official IRS Mileage Rates for 2026
As of this writing, the IRS has not yet published a formal notice detailing the 2026 standard mileage rates.
However, historical patterns suggest that a rate update will be released in mid-December, with the new rates taking effect on January 1, 2026. Once the official notice is issued, it will be important to incorporate that figure immediately into your expense reimbursement policy.
Here’s a summary of the most recent published rates for business mileage reimbursement and what to expect for 2026:
Mileage Rates Table
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Many organizations anticipate a modest increase for 2026 because the business mileage rate was raised by 3 cents for 2025. Once the IRS issues the official notice (such as a “Notice 2026-x”), it should be cited directly in your policy.
What the Rate Change Means for Businesses and Employees
Employers and HR/finance teams
A higher mileage rate means increased reimbursement liability if you pay the full IRS rate. Employers should update their expense reimbursement policies before January 1 to reflect any new rate, to remain non-taxable for employees, and be compliant with IRS guidance.
Employees and contract drivers
The standard mileage rate serves as the ceiling for tax-free reimbursements. If your employer reimburses at the IRS rate or less, the reimbursement is not treated as taxable income. Paying above the rate may trigger fringe benefit taxation.
Self-employed individuals
The standard mileage rate also sets the threshold for deducting business vehicle expenses when you choose the “standard mileage” method (versus actual cost). A rise in the rate means your deduction under that method goes up accordingly.
Why the IRS Adjusts Mileage Rates Annually
The IRS reviews the standard mileage rate annually so that companies and taxpayers remain aligned with real-world vehicle operating costs.
This IRS mileage rate calculation begins by analyzing both fixed costs (such as depreciation, insurance, license, and registration) and variable costs like fuel, maintenance, oil changes, and tires.
One of the most visible drivers is the gas price impact: when fuel prices increase, the cost of traveling a mile increases accordingly, making it important for the IRS to reflect that change in the mileage rate.
But it’s not just fuel. Maintenance, repairs, and the gradual wear on vehicles have shown a stronger correlation to annual adjustments, as noted by recent analyses.
Macroeconomic factors and market volatility also influence the IRS's annual adjustment. Inflation increases fixed and variable vehicle expenses, while changes in energy markets, supply-chain challenges, and global commodity price swings all influence how far a dollar of reimbursement will carry a driver.
For example, if insurance premiums and tyre costs climb substantially, the mileage rate must rise to keep pace. Overlooking such changes could leave employees under-reimbursed and businesses non-compliant.
Who Needs to Update Expense Policies Before January 1, 2026?
Updating your business expense policy is a compliance imperative as we approach the date of the new IRS mileage rate. You’ll want to review and revise your reimbursement procedures now to stay aligned with the latest IRS mileage policy and your employer obligations.
Businesses reimbursing employees for travel
If your company reimburses staff for business miles driven in personal vehicles, you must update your reimbursement rates and sign-off procedures. Failing to align with the updated standard could lead to over-payment (making excess reimbursement taxable) or under-payment (staff bearing extra costs).
It’s your reimbursement compliance responsibility to ensure the mileage rate in your policy is accurate.
Even if you’re not a traditional employer, you likely offer mileage reimbursements for volunteer travel, charity work, or program delivery. It’s important to adjust your policy to reflect the upcoming IRS mileage policy to maintain tax-deductible status for the reimbursement and protect the organization from IRS scrutiny.
Self-employed individuals claiming deductions
As a freelancer, contractor, or business owner, you must update your own internal expense policy (or reimbursement policy if you have one) so that your deductions for business miles remain valid under the revised 2026 rate.
Government agencies and contractors
Entities subject to federal regulation or contract reimbursement schedules often tie mileage rates to the IRS’s standard. If your agency or contract uses the IRS standard mileage rate as a benchmark, you must update your policy (and any internal documentation) before January 1 to remain consistent with federal guidelines.
How to Update Your Expense Reimbursement Policy
Review your current reimbursement policy
Conduct a thorough audit of your existing expense reimbursement policy. Focus in particular on sections where mileage rates are referenced; these are the most important points that must align with the forthcoming 2026 rate.
Look for legacy language such as “rates as set by the IRS each year” without a fixed number, or previous year numbers that have not been updated. You’ll want to flag those for revision.
Update mileage rates to match the 2026 IRS standard
Once you have identified where mileage appears in your policy, replace the outdated rate with the newly published 2026 standard. Ensuring compliance with the IRS mileage guidelines is necessary for both tax deduction legitimacy and internal policy enforcement.
This change ensures your reimbursement aligns with the IRS accountable plan rules and prevents over- or under-reimbursement. Be sure to mention the effective date (in this case, January 1, 2026) to ensure clarity for employees and auditors alike.
Communicate changes to employees and finance departments
Communication is important once the policy updates are drafted. Distribute the updated policy via email, internal intranet, and, if applicable, in printed handbook form. Emphasize the new mileage rate and the January 1 effective date.
Train the finance and accounting teams on the change so they can answer employee questions; this follows best-practice recommendations on communication of policy updates. Also, encourage employees to review the changes and sign off where required.
Update your systems to reflect the new mileage rate. Whether you’re using QuickBooks, Xero, or another payroll/expense management platform, adjust the default reimbursement settings to the new 2026 rate.
Ensure that expense templates, mileage logs, and reporting dashboards pull the correct values going forward. Automation and system updates reduce errors and manual overrides.
Train managers on the new reimbursement procedures
Offer a short training session or cheat-sheet that covers: how to verify mileage claims, where to look for the updated rate in the system, and how to handle legacy claims submitted with the old rate.
Effective manager training ensures consistent application across departments and reduces discrepancies.
Document compliance for audit readiness
Create a simple audit package: a dated memo summarizing the policy change, a version history of the policy, and a log of communications to employees. Retain copies of expense reimbursement requests submitted under both the old and new rates, showing a clean transition.
Solid documentation protects your company during an IRS audit or internal review.
How to Calculate Mileage Reimbursement in 2026
The formula for the calculation is:
Reimbursement Amount = Total Miles Driven × Appropriate Rate
You’ll need:
The number of qualifying miles (business, medical, charitable)
The correct mileage rate for 2026 (or the most current rate available)
Then multiply to get the dollar amount.
For instance;
Business travel: Suppose you travel 350 miles for client visits and your organization uses the standard rate. If the 2026 business rate is (for example) $0.70/mile, then 350 × $0.70 = $245.
Medical transportation: Say an employee drives 120 miles to a qualifying medical appointment, and the medical/moving rate is $0.21/mile (as in recent years). Then 120 × $0.21 = $25.20.
Charitable mileage: A volunteer drives 450 miles to help a nonprofit, and the charitable rate remains $0.14/mile. 450 × $0.14 = $63.
IRS Mileage Deduction Rules for Self-Employed and Employees
Here’s what you must know when it comes to the IRS mileage deduction for 2026, including deducting versus reimbursing mileage, eligibility criteria, required records, when to choose standard vs. actual expenses, and how to avoid audit-trigger errors.
Differences between deducting mileage and reimbursement
Reimbursement is when an employer pays you for business miles, usually under an accountable plan, so the payment is tax-free. Deduction means you, as the taxpayer, claim the costs of business vehicle usage on your tax return (e.g., via Schedule C if self-employed).
For most employees, unreimbursed mileage deductions were eliminated under the Tax Cuts and Jobs Act (TCJA) of 2017. Self-employed individuals and business owners, however, may still claim a deduction by choosing between the standard mileage rate method or the actual vehicle expenses method.
Who qualifies for deductions?
For tax year 2026, if you are self-employed, a freelancer, a ride-share or delivery driver, or an independent contractor using your vehicle for business, you may be eligible to claim a mileage deduction.
The most important thing is that the miles must be for business use, above and beyond ordinary commuting. The IRS’s Topic No. 510 explains that business-use car costs can be deducted using the standard mileage rate or actual expense method.
If you are a regular W-2 employee whose employer does not reimburse you, you typically cannot deduct unreimbursed mileage because of the TCJA limitation.
What records does the IRS require to substantiate mileage claims?
Whether you choose the standard mileage method or actual expenses, you must keep a mileage log showing date, business purpose, starting point, destination, and miles driven.
If you choose the actual expenses method, you must also keep receipts for fuel, insurance, repairs, registration fees, and depreciation or lease payments, apportioned for the business-use percentage. You should require odometer logs or approved mileage-rate calculations within your policy to ensure compliance.
When actual vehicle expenses may be better than the standard mileage rate
The standard mileage method is simple; you multiply business miles by the IRS rate (e.g., 67¢ per mile for 2024) and you’re done.
But if you drive a luxury vehicle, have high maintenance costs, large depreciation or lease payments, or low business mileage, the actual expense method (tracking every eligible cost) may yield a larger deduction.
If you choose the standard mileage rate in the first year the vehicle is used for business, you may later switch to actual expenses. But if you begin with actual expenses, you generally can’t switch to standard mileage for that vehicle.
Common Mistakes Businesses Make with Mileage Reimbursement
Businesses usually make several mileage reimbursement mistakes, each one increasing their IRS compliance errors and expanding mileage policy audit risks. Here are some of the errors and how to fix them.
Not updating rates annually
When a company reimburses mileage at last year’s rate, or worse, uses an outdated custom rate, they expose themselves to compliance risk. The IRS publishes standard mileage rates yearly; ignoring the update means your policy isn’t aligned with current tax rules.
Solution: At the end of each year, update your reimbursement rate in your policy to mirror the new IRS standard, and communicate the change to payroll and employees.
Reimbursing non-business trips
It’s tempting to allow employees to claim mileage for anything car-related, but personal commutes or errands that aren’t business-related do not qualify.
Solution: Clearly define “business trip” in your policy, exclude commuting or personal errands, and verify trip purpose before reimbursement.
Poor mileage documentation
When you lack detailed logs, dates, purpose, start/end locations, and miles driven, you’re vulnerable to IRS scrutiny.
Solution: Require a standardized mileage log or app submission. Store logs for the IRS-required number of years.
Inconsistent application across departments
One department reimburses at the correct rate with proper logging, while another uses past rates or informal spreadsheets; this inconsistency invites audit flags.
Solution: Apply a centralized expense policy that covers all departments, train managers, and monitor compliance uniformly.
Using outdated accounting systems
Many businesses still rely on spreadsheets or manual logs that lack audit-trail features or automatic rate updates.
Solution: Upgrade to an expense-management platform that integrates mileage tracking, has built-in IRS-rate updates, and enforces documentation steps.
Automate Your 2026 Mileage Policy with Chore's Smart Reimbursement Solution
Stop struggling with spreadsheets and outdated rates. Chore eliminates the administrative burden of IRS mileage compliance by automating your entire reimbursement workflow, so your startup stays compliant without the overhead.
Here's how Chore transforms mileage management:
Automatic rate updates: Chore syncs with IRS announcements, updating your 2026 mileage rates instantly across all expense submissions; no manual policy rewrites needed.
Built-in documentation: Employees submit mileage claims with required details (date, purpose, odometer readings) through an intuitive interface that enforces compliance before submission reaches your approval queue.
Real-time tracking and approval: Managers review and approve claims in seconds, with automated calculations ensuring accuracy and preventing common errors like non-qualifying trips or outdated rates.
Audit-ready reporting: Every reimbursement generates a complete audit trail, storing logs and substantiation documents exactly as the IRS requires, eliminating last-minute scrambles during reviews.
Seamless payroll integration: Approved mileage reimbursements flow directly into your existing payroll system, thus reducing processing time from days to minutes.
Ready to eliminate mileage headaches before January 1? Start your free Chore trial today and automate IRS-compliant reimbursements in under 10 minutes.
FAQs
How often does the IRS update the mileage rate?
The IRS updates the standard mileage rate once a year, typically announcing the new rate in December for use starting January 1 of the following year.
However, in certain years when fuel prices or vehicle operating costs fluctuate significantly, the IRS may issue a midyear adjustment. For example, in 2022, the IRS made a rare midyear rate increase (effective July 1, 2022) due to increasing gas prices.
Can employers reimburse at a higher rate than the IRS standard?
Yes, employers can reimburse employees above the IRS standard mileage rate, but the excess amount becomes taxable income. If you pay at or below the IRS rate, reimbursements are tax-free. Anything above it must be included in the employee’s wages, reported on Form W-2, and subject to income and payroll taxes.
Are electric vehicles covered under the mileage rate?
Yes, electric vehicles (EVs) are fully covered under the IRS standard mileage rate for business, medical, moving, and charitable purposes.
The IRS mileage rate is designed to represent the average cost of operating a vehicle, which includes expenses such as maintenance, insurance, depreciation, and energy (fuel or electricity). The IRS does not differentiate between gas-powered, hybrid, or electric vehicles when determining eligibility.
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Chore Team
| Last updated on
Jan 22, 2026
The Chore team consists of individuals from diverse backgrounds with a passion for learning and a desire to share knowledge.
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