2026 mileage reimbursement rate: Predictions and business impact
The IRS mileage rate announcement hits every December like clockwork, and smart businesses get ahead of it instead of scrambling to adjust budgets in January. The 2026 rate hasn't been released yet, but the trends are clear: vehicle costs keep climbing, and the standard mileage rate follows.
And with the average American driving about 14,263 miles a year, business mileage reimbursement is an expense with a lot of weight. Whether you're a small business owner tracking delivery drivers or a finance manager overseeing a sales team, knowing what's coming helps you plan smarter.
This guide breaks down what to expect for the 2026 mileage reimbursement rate, the factors driving rate changes, and how to turn a routine policy update into a budget advantage.
Key takeaways
- The IRS typically announces new standard mileage rates each December, with rates taking effect January 1, so the 2026 rate will likely be revealed in late 2025.
- The current 2025 business mileage rate stands at 70 cents per mile, reflecting a steady upward trend driven by rising vehicle ownership costs including insurance, maintenance, and depreciation.
- The average American drives about 14,263 miles per year in total, making even modest business-use mileage a meaningful reimbursement expense.
- Businesses with mobile workforces should monitor rate changes closely, as even a one-cent increase can substantially impact annual reimbursement budgets and tax deduction strategies.
- The IRS requires contemporaneous mileage logs documenting date, destination, business purpose, and miles driven, which means having automated tracking tools help to eliminate manual errors and ensure audit-ready compliance.
What is the IRS standard mileage rate?
The IRS standard mileage rate is a per-mile amount that taxpayers can use to calculate the deductible costs of operating a vehicle for business, medical, charitable, or military moving purposes. Instead of hoarding gas receipts in your glove compartment and tracking every oil change, you multiply your business miles by this single rate. Done.
It's an optional alternative to tracking actual vehicle expenses throughout the year. Most taxpayers choose the standard mileage rate because it's simpler, and because nobody wants to explain to the IRS why they have 47 crumpled receipts from various gas stations but somehow lost the big ones.
As of this publication, the official 2026 rates haven't been announced yet. The IRS typically releases new rates in December of the prior year, so expect the announcement in late 2025. Until then, businesses should continue using the 2025 mileage reimbursement rates for planning and reimbursement purposes.
| Category | Current Rate |
|---|---|
| Business use | 70 cents per mile |
| Medical or moving (active-duty military) | 21 cents per mile |
| Charitable organizations | 14 cents per mile |
Our predicted mileage rate for business use
At Expensify, we’re predicting the 2026 business mileage reimbursement rate will likely increase slightly, potentially reaching 71 to 72 cents per mile, based on rising vehicle ownership costs and historical patterns. While fuel costs have stabilized somewhat, insurance premiums and vehicle depreciation continue climbing, which typically pushes the rate upward.
This mileage rate prediction is based on current economic trends and the IRS's methodology for calculating rates. Businesses should treat this as a planning estimate only and monitor the official IRS website for the formal IRS mileage rate 2026 announcement in late 2025.
The actual rate depends on data the IRS collects throughout the year, including fuel prices, insurance costs, and vehicle depreciation trends. Even a modest increase of one or two cents per mile can add thousands of dollars to annual reimbursement budgets for companies with mobile workforces.
How the IRS determines standard mileage rates
The IRS conducts an annual study of the fixed and variable costs of operating an automobile. This isn't guesswork. It's based on data from an independent contractor who analyzes nationwide vehicle operating costs.
Fixed costs include depreciation, insurance, registration fees, and license costs. These expenses don't change based on how much you drive.
Variable costs include fuel, maintenance, repairs, and tire replacement. These fluctuate depending on mileage.
The IRS weighs both categories to arrive at a single per-mile rate. When insurance premiums spike or used car values climb, those changes show up in the next year's rate announcement.
Key factors that affect mileage rate changes
Multiple economic factors combine to push rates up or down each year. Understanding what drives rate changes helps businesses anticipate adjustments and plan accordingly.
Fuel prices and gas cost fluctuations
Fuel is a significant variable cost, though it has become less dominant in rate calculations as other costs rise. Gas prices impact the rate, but they're not the only factor the IRS considers.
Even when fuel prices stabilize, other vehicle costs often continue rising. That's why the standard mileage rate can increase even during periods of relatively stable gas prices.
Vehicle depreciation and ownership costs
Depreciation represents the decline in vehicle value over time, and new and used car prices directly affect this calculation. When vehicle prices climb, depreciation costs rise proportionally, pushing the standard rate higher. Understanding the vehicle cost deduction helps businesses grasp the full scope of what the IRS factors into the mileage rate.
According to AAA's Your Driving Costs analysis, the total cost to own and operate a new vehicle in 2025 averages about $11,577 – a decrease of $719 from 2024. This reflects factors like:
Lower depreciation
Reduced finance charges
Falling fuel costs
While this represents a rare decline in recent years, it remains substantially higher than historical averages.
Understanding accumulated depreciation helps businesses grasp why vehicle ownership costs affect the standard mileage rate so significantly.
Maintenance and repair expenses
Rising labor and parts costs for routine maintenance and unexpected repairs contribute to higher overall vehicle operating costs. Oil changes, tire rotations, and brake replacements all factor into the IRS's calculations.
These costs tend to increase steadily over time as vehicle complexity grows and labor rates rise. Even if you maintain your vehicle meticulously, these industry-wide trends affect the standard mileage rate.
Auto insurance rate trends
Insurance premiums have increased significantly over the past few years, contributing to higher overall vehicle operating costs. According to government CPI data, prices for motor vehicle insurance rose about 11.3 percent year-over-year in 2024, outpacing general inflation and showing how driving-related costs are changing.
These steep insurance increases directly impact the fixed costs portion of the IRS's standard mileage rate calculation, often pushing the rate upward even when other costs remain stable.
Inflation and economic indicators
Broader economic conditions and inflation influence all vehicle-related costs simultaneously. When overall prices rise, vehicle ownership costs typically follow.
According to the Federal Bureau of Labor Statistics, overall consumer prices (CPI-U) increased about 3.0 percent from September 2024 to September 2025. This provides important context for understanding why transportation costs like insurance and fuel continue climbing.
Historical IRS mileage rate trends
Looking at recent rate changes helps businesses anticipate future adjustments and understand the pattern of gradual increases. The standard mileage rate has generally trended upward over the past several years, reflecting rising vehicle ownership costs across the board.
Here's how rates have changed:
| Year | Business Rate | Change from Prior Year |
|---|---|---|
| 2025 | 70 cents | +3 cents |
| 2024 | 67 cents | +1.5 cents |
| 2023 | 65.5 cents | +3 cents |
| 2022 | 62.5 cents (second half) | +4 cents mid-year adjustment |
| 2022 | 58.5 cents (first half) | +2.5 cents |
| 2021 | 56 cents | No change |
| 2020 | 57.5 cents | -1.5 cents |
This pattern shows rates increasing more frequently than decreasing, with occasional mid-year adjustments during periods of significant economic change.
The 2022 mid-year increase was particularly notable, reflecting rapid fuel price spikes during that period. And the 2024 mileage rate took a huge leap in 2025 when it rose by three cents.
How mileage rate changes affect business budgets
Rate changes ripple through finance departments, affecting everything from monthly reimbursement checks to annual tax deductions. Even small increases add up quickly for companies with mobile workforces.
Forecasting employee reimbursement costs
A higher rate increases total reimbursement expenses for companies with mobile workforces. The math is simple but the impact adds up fast.
Example: If your sales team drives 10,000 business miles per month collectively, a one-cent increase adds $1,200 annually to your reimbursement budget.
Businesses should factor potential rate increases into their financial planning. Building a buffer of one to two cents per mile into budget projections helps avoid surprises when the IRS announces the new rate in December.
Understanding the different types of reimbursements for employees helps businesses structure comprehensive reimbursement programs that cover mileage alongside other business expenses.
Updating company mileage policies
Businesses should review and adjust their internal travel and expense policies when new rates are announced. Some companies reimburse at the IRS rate automatically, while others set their own rates based on budgetary considerations.
Clear communication matters. When rates change, update your policy documents and notify employees promptly. Confusion about reimbursement rates leads to processing delays and frustrated employees.
Compliance and tax deduction considerations
Using the correct rate ensures IRS compliance and maximizes legitimate tax deductions. Businesses claiming mileage deductions on tax returns must use the official IRS rate for the applicable tax year.
Reimbursing employees above the IRS rate may trigger taxable income issues. Amounts exceeding the standard rate could be considered taxable compensation unless you're using an accountable plan that documents higher actual costs.
How to calculate your business mileage deduction
The business mileage deduction calculation is straightforward: multiply total business miles driven by the standard rate. This applies to tax returns and self-employment deductions, though employer reimbursement amounts can differ based on company policy.
Here's the process:
Track total business miles: Record all qualifying trips throughout the year, including client meetings, job sites, and business-related errands.
Apply the standard rate: Multiply your total business miles by the IRS rate for that tax year.
Claim on tax return: Report the deduction on the appropriate tax form – Schedule C for self-employed individuals or Form 2106 for employees with unreimbursed business expenses (though this is now limited to specific professions).
Example: If you drove 8,000 business miles in 2025, your deduction would be 8,000 miles × $0.70 = $5,600. That's a significant tax benefit that makes proper mileage tracking worthwhile.
Who qualifies for the standard mileage rate?
Not everyone can use this method. The vehicle has to meet certain criteria, and you must choose this method in the first year the vehicle is used for business.
Once you opt in, you can switch to actual expenses in later years, but the reverse isn't true.
Self-employed professionals and freelancers
Independent contractors can deduct business mileage on Schedule C when filing their tax returns. This includes consultants, real estate agents, contractors, and anyone operating as a sole proprietor or single-member LLC.
The key requirement: you must use the vehicle for business purposes. Personal commuting to and from your home office doesn't count, but driving to meet clients, visiting job sites, or making business-related errands all qualify.
Rideshare and delivery drivers
Gig economy workers commonly use the standard mileage rate for their driving income. Uber and Lyft drivers, DoorDash couriers, and Instacart shoppers all qualify if they're tracking business miles properly, which is trickier than it sounds.
The challenge: separating business miles from personal miles. Only miles driven with passengers or while actively delivering orders count as business mileage. That drive home after your last delivery? Personal. The drive to your favorite spot to wait for ride requests? Also personal. Yes, it's annoying. And no, the IRS doesn't care.
Businesses reimbursing employee travel
Employers can use the IRS rate as a benchmark for tax-free employee reimbursements under an accountable plan. This means reimbursing employees at or below the standard rate keeps those payments tax-free for the employee.
Companies can set their own rates, but amounts exceeding the IRS standard rate may be considered taxable income unless the business can document higher actual costs through detailed expense tracking.
How to track business mileage accurately
The IRS requires contemporaneous records for audit purposes. "Contemporaneous" is IRS-speak for "you can't recreate your mileage log at year-end based on vague memories of that client meeting in March." You need to document trips as they happen, or at least shortly afterward, before you forget whether you drove to Detroit or Denver.
1. Use automatic GPS mileage tracking
Apps that automatically detect and log trips eliminate manual entry errors, and the inevitable "was it 47 miles or 74 miles to that meeting?" debates later. Your smartphone's GPS tracks your route, calculates mileage, and timestamps each trip without requiring you to remember to start and stop tracking.
Automatic tracking is especially valuable for people who make multiple business trips per day. Instead of scrambling to remember where you went, your app creates a complete trip log automatically.
2. Record trip details and business purpose
Each trip log should include the date, starting location, destination, and business reason. "Meeting with client" or "Site inspection" provides sufficient detail without requiring extensive documentation.
The business purpose is critical for IRS compliance. Simply recording miles without explaining why you made the trip won't satisfy audit requirements.
Brief but clear descriptions protect you if your mileage deductions are ever questioned.
3. Sync mileage data with expense reports
Integrating mileage tracking with expense management software streamlines reimbursement workflows. Instead of submitting separate mileage logs and expense reports, employees can include everything in a single submission.
Expensify offers automatic mileage tracking automatic mileage tracking that syncs directly with expense reports, making it easy to capture business miles and submit them for reimbursement without manual data entry.
Automate mileage reimbursement and simplify expense management
Manual mileage logs are where good intentions go to die. Forgotten trips, incorrect calculations, missing documentation – they all pile up until tax season arrives and suddenly you're reconstructing three months of client visits based on calendar invites and wishful thinking.
Expensify eliminates these headaches by automatically tracking business mileage, calculating reimbursement amounts, and maintaining audit-ready records.
Employees simply drive, and the app handles the rest. No manual entry, no forgotten trips, no scrambling at month-end. Finance teams get accurate data without chasing down missing mileage logs, and employees get reimbursed faster.
The system integrates seamlessly with your existing expense management workflow. Mileage reimbursements flow through the same approval and payment process as other business expenses, giving you complete visibility into travel costs across your organization.
Get started with Expensify by clicking on the button below and see how easy mileage reimbursement can be.
FAQs about IRS mileage reimbursement rates
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The IRS typically announces new standard mileage rates in December, with the new rates taking effect on January 1 of the following year. For the 2026 rates, expect an announcement in late December 2025. The IRS publishes the announcement on their website and through official press releases.
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The IRS rate applies to tax deductions for all taxpayers, while General Services Administration (GSA) rates apply specifically to federal government employee travel reimbursements. GSA rates may differ slightly from IRS rates because they're calculated separately for federal reimbursement purposes rather than tax deductions.
Federal employees using privately owned vehicles (POV) for official travel follow POV mileage reimbursement rates set by the GSA, which are often aligned with but not identical to IRS rates.
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Yes, businesses can set their own reimbursement rates. However, amounts exceeding the IRS standard rate may be considered taxable income to the employee unless the business maintains detailed records proving higher actual costs. Many companies choose to reimburse at or below the IRS rate to keep payments tax-free and simplify administration.
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The IRS standard mileage rate applies equally to electric, hybrid, and gas-powered vehicles. EV drivers can use the same rate for business mileage deductions, even though their fuel costs are lower. The rate is designed to reflect average vehicle operating costs across all vehicle types.
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Yes, the IRS requires contemporaneous written records including the date, destination, business purpose, and miles driven for each trip to substantiate mileage deductions. Electronic logs are acceptable as long as they contain all required information. Without proper documentation, the IRS can disallow your mileage deductions during an audit.
