2026 Standard Mileage Rate for Business Use: What You Need to Know

August 26, 2026

Employers deducting the amounts reimbursed to employees for travel costs are subject to strict income tax verification requirements. Even if travel is undertaken for valid business purposes, if proof is not sufficient, the deduction is disallowed. For automobile travel, substantiation includes documenting business purpose, travel dates and times, collecting and maintaining receipts, and ensuring that personal travel is separated from business travel by keeping a contemporaneous mileage lot.

Proper accounting for employee travel expenses can be tedious. One way to simplify recordkeeping is for an employer to use IRS established allowances and standards. Although valid business purpose and travel dates and times must still be established, in lieu of reimbursing employees for their actual expenses, employees are paid an allowance or are reimbursed in accordance with IRS standards.

Regarding automobile expenses, the IRS provides a business mileage rate, known as the “cents-per-mile” rate. This rate is used to reimburse an employee for miles driven for the use of a car, van, pickup or panel truck. The rate applies to fully electric and hybrid automobiles, as well as gasoline and diesel-powered vehicles. The rate is used instead of determining the amount of fixed expenses (e.g., depreciation, lease payments, license and registration fees) and variable expenses (e.g., gas, power and oil).

The use of the standard mileage rate is optional, and employers are allowed to reimburse employees for the actual cost of vehicle use. For an employer to use the allowance, the employee must have a valid driver’s license and personal auto insurance.

From January 1 to June 30, 2026, the IRS established the business standard mileage rate at 72.5 cents per mile (up 2.5 cents over the 2025 rate). During this time, if an employee drove 100 miles on employer business, the employer could reimburse the employee $7.25.

On July 13, 2026, the IRS announced an increase in the mileage rate for the second half of the year. Ordinarily, the IRS updates mileage rates only once a year, but occasionally it makes interim adjustments like this one, which reflects recent increases in the price of fuel. Thus, effective July 1, 2026, the standard mileage rate increased to 76 cents per mile. During this time, if an employee drove 100 miles on employer business, the employer could reimburse the employee $7.60.

Travel expense deduction often attracts IRS attention. It is critical for employers to ensure that costs comply with requirements, and are reasonable and properly accounted for. It is important to work with your accountant for guidance in these matters.

For additional information see the IRS website for Topic no. 510, Business use of car (https://www.irs.gov/taxtopics/tc510).

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This material is generic in nature. Before relying on the material in any important matter, users should note date of publication and carefully evaluate its accuracy, currency, completeness, and relevance for their purposes, and should obtain any appropriate professional advice relevant to their particular circumstances.

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