IRS Announces Midyear Increase to Standard Mileage Rates for 2026

For only the second time in more than a decade, the IRS has adjusted the optional standard mileage rate in the middle of the tax year. The adjustment is a direct response to a significant increase in fuel prices during the first half of 2026 and affects how businesses, self-employed individuals, and certain employees should calculate vehicle-related deductions and reimbursements for the remainder of the year.

For businesses and individuals that track mileage for tax purposes, the sections below outline what changed, why the IRS made the adjustment, and the steps that should be taken to remain compliant for the remainder of the year.

The Revised Rates, Effective July 1, 2026

The IRS issued Announcement 2026-11 to modify the rates originally published in Notice 2026-10. Effective July 1, 2026, the optional standard mileage rates are as follows:

• Business use: 76 cents per mile (increased from 72.5 cents)

• Medical and moving purposes (qualified active-duty military): 23.5 cents per mile (increased from 20.5 cents)

• Charitable use: 14 cents per mile — unchanged, as this rate is fixed by statute under Internal Revenue Code Section 170(i) rather than subject to periodic adjustment

All other provisions of Notice 2026-10 remain in effect. The relevant date for recordkeeping purposes is July 1: mileage driven and reimbursements paid prior to that date should continue to reflect the original 2026 rates, while mileage from July 1 through December 31 should reflect the revised rates.

Rationale for the Midyear Adjustment

The IRS typically establishes the standard mileage rate once annually, near the start of the tax year, based on a study of the fixed and variable costs associated with operating a vehicle. Fuel represents one of the largest variable costs in that calculation, and it changed considerably in the first half of 2026.

Gasoline prices were comparatively low when the original 2026 rate was established late last year. By mid-July, the national average price for regular gasoline had risen to approximately $3.89 per gallon, up from approximately $2.82 in early January — an increase of nearly 40 percent within a matter of months. This shift was significant enough that the original rate no longer accurately reflected the cost of operating a vehicle for business purposes, prompting the IRS to issue a revised rate rather than wait until the start of the following tax year.

This type of midyear correction is uncommon but not unprecedented. The most recent comparable adjustment occurred in 2022, when gasoline prices rose sharply following disruptions in the global oil market. Outside of that instance, the IRS has generally maintained a single annual rate for the full tax year.

Implications for Businesses and Individuals

Self-employed individuals and business owners using the standard mileage method will need to track mileage separately for the two portions of the year: miles driven from January 1 through June 30 should be deducted at 72.5 cents per mile, and miles driven from July 1 through December 31 should be deducted at 76 cents per mile. As a result, the 2026 return will require two separate mileage calculations to arrive at a single deduction figure.

Employers that reimburse employees for business use of personal vehicles should update any reimbursement policy built around the prior rate. To remain within the accountable plan rules and avoid having the reimbursement treated as taxable wages, mileage reimbursed for travel occurring on or after July 1 should reflect the revised 76-cent rate.

Employers using the cents-per-mile valuation method for imputing income on employer-provided vehicles used for personal purposes should update that calculation as well, effective July 1.

For W-2 employees: Unreimbursed business mileage remains non-deductible on individual returns. The miscellaneous itemized deduction subject to the 2 percent AGI floor was permanently eliminated under the 2025 tax law changes. As a result, this rate increase primarily benefits self-employed taxpayers, business owners, and employees who receive direct reimbursement from their employers.

Summary

A 3.5-cent increase per mile may appear modest in isolation, but for businesses with sales teams, field service staff, or employees who drive frequently for work, the cumulative effect across a fleet or a full year of travel can be substantial. Businesses are encouraged to confirm that mileage logs are clearly divided at the July 1 effective date, update any reimbursement policies or payroll systems still reflecting the prior rate, and ensure bookkeeping records are adjusted accordingly going forward.

For questions regarding how this change affects a specific situation — including business mileage deductions, employee reimbursement policies, or broader fleet-related tax planning — the GCAAG team is available to provide guidance.