2026 IRS Mileage Rate: 72.5 Cents Per Mile

Most employers who reimburse mileage benchmark against the IRS business rate. It is the simplest, most defensible number because it comes from a published federal standard. But using the IRS rate is optional — employers can choose a higher or lower rate, or adopt a different method entirely (such as FAVR or a flat car allowance).

When the rate changes, update your reimbursement policy and communicate the new rate to employees before the effective date. A lag in updating the rate can create confusion about which rate applies to trips that span the year boundary.

• Update the reimbursement policy rate and effective date before January 1.
• Communicate the new rate to employees, ideally with a worked example showing the difference from the prior year.
• If using the IRS rate as a benchmark, document that choice in the written policy to support accountable plan treatment.
• Review accountable plan compliance: business connection, substantiation within 60 days, and return of excess reimbursements.

Under an accountable plan, mileage reimbursement is not taxable income to the employee and is deductible by the employer. To qualify, the plan must meet three IRS requirements: (1) the expense must have a business connection, (2) the employee must substantiate the amount, time, use, and business purpose within a reasonable period (typically 60 days), and (3) the employee must return any excess reimbursement.

If an employer pays a flat car allowance without requiring mileage substantiation, or if the reimbursement exceeds the IRS rate without documentation, the payments may be treated as taxable wages subject to payroll tax withholding.

Taxpayers have a choice each year: use the standard mileage rate (72.5 cents per mile for business in 2026) or track actual expenses (fuel, maintenance, insurance, depreciation, registration, tires). The standard method is simpler; the actual-expense method can produce a larger deduction if the vehicle is expensive to operate.

Important: if you use the standard mileage method in the first year the vehicle is placed in service, you can switch between methods in later years. But if you use actual expenses in the first year, you cannot later switch to the standard method for that vehicle. This is sometimes called the 'first-year rule.'

• Standard method: track only miles. Simpler, lower audit burden, predictable result.
• Actual expense method: track every receipt. Better for high-cost vehicles or high-business-use scenarios.
• First-year rule: using standard mileage in year 1 preserves the option to switch later. Using actual expenses in year 1 locks you into actual expenses for the life of the vehicle.
• If you are unsure, start with the standard method. The flexibility to switch later is more valuable than an optimized first-year deduction for most taxpayers.

The IRS mileage rate estimate is only as strong as the trip records behind it. A mileage log is not optional if you want the claim to survive review. The IRS expects contemporaneous records — logs created at or near the time of the trip, not reconstructed months later from calendar entries.

• Trip date and start/end odometer readings or trip distance.
• Destination and business purpose (who you met with and why).
• Category selection that matches the rate used (business, charitable, medical, or moving).
• Total annual mileage for the vehicle — the IRS needs to know how much of the vehicle's use was business vs personal.
• Parking and toll receipts tracked separately since they are not included in the 72.5c rate.