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As we begin 2026, the IRS has updated the standard mileage rates that many employers use to reimburse employees for business travel in personal vehicles. These mileage rates are key for payroll, expense policy planning, and tax compliance, and are especially important to businesses with mobile workforces, sales teams, consultants, or employees who frequently drive for work.
What’s New for 2026?
For the 2026 tax year, the Internal Revenue Service (IRS) announced changes to the standard mileage rates that take effect January 1, 2026:
| Use Type | 2026 IRS Mileage Rate |
|---|---|
| Business use (cars, vans, pickups) | 72.5¢ per mile |
| Medical travel | 20.5¢ per mile |
| Moving (certain military personnel) | 20.5¢ per mile |
| Charitable purposes | 14¢ per mile (unchanged) |
The business rate has increased by 2.5 cents from the 2025 rate, while the medical and moving rates have decreased by half a cent. The charitable rate remains unchanged because it is set by statute and has historically changed very slowly.
What This Means for Employers
Employers often use the IRS mileage rate as a benchmark to reimburse employees who drive personal vehicles for work-related activities. Here’s how this update may affect your business:
Reimbursement Policies
- Many companies tie their mileage reimbursement policies to the IRS standard rate. Increasing the business mileage rate to 72.5¢ would result in higher reimbursement costs if your policy mirrors the IRS rate.
- You are not required to reimburse at the IRS rate; any amount above that rate is usually taxable to the employee. Employers may choose a lower rate if needed, but doing so can affect employee satisfaction and retention.
Tax Compliance & Recordkeeping
- The IRS permits the standard mileage rate as a safe harbor for calculating deductible vehicle-use costs. This simplifies payroll and tax reporting compared with calculating actual vehicle expenses.
- Regardless of the rate used, accurate mileage records are essential. Have employees maintain date, destination, business purpose, and total miles driven to substantiate reimbursements and deductions.
Budgeting & Forecasting
- An increase in the business rate impacts your annual travel and expense budgets. Even modest per-mile increases can add up quickly across teams that log significant travel.
- Plan ahead: adjust your 2026 expense forecasts and communicate rate changes to employees and managers now.
Practical Tips for Employers
Update your mileage reimbursement policy
Ensure your internal policy reflects the 2026 IRS rate (if you use it), and clarify whether reimbursements will be automatic or require manual approval.
Centralize expense tracking
Using digital mileage or expense management tools improves accuracy and compliance, and makes it easier to prepare for an audit.
Communicate changes early
Notify employees in advance of the new rates so they understand how reimbursements will be calculated and processed.
Review taxable implications
Consult your payroll or tax advisor if you plan to reimburse employees for expenses above the IRS standard mileage rate; amounts above the IRS rate are typically taxable income.
Keeping your travel reimbursement processes up to date with IRS guidance helps maintain fairness, protects your tax position, and ensures employees are compensated appropriately for business travel.
