IRS Increases 2026 Mileage Reimbursement Rate

In a rare mid-year adjustment, the Internal Revenue Service (IRS) has increased the optional standard mileage rate for business travel from 72.5 cents to 76 cents per mile, effective July 1 through December 31, 2026. The change reflects rising fuel costs and other vehicle operating expenses, providing employers with an updated benchmark for reimbursing employees who use their personal vehicles for business purposes.

Mid-year mileage rate changes don’t happen often. The IRS typically sets the standard mileage rate once each year, making this adjustment noteworthy for employers that reimburse employees for work-related travel.

What Changed?

The updated IRS standard mileage rates for the second half of 2026 are:

• Business travel: 76 cents per mile (up from 72.5 cents)
• Medical and qualified moving travel: 23.5 cents per mile (up from 20.5 cents)
• Charitable service: 14 cents per mile (unchanged by law)

For employers, the business mileage rate is the most significant change because it affects how employees are reimbursed for driving their personal vehicles for work-related purposes.

What Does This Mean for Employers?

If your organization reimburses employees using the IRS standard mileage rate, you’ll want to update your expense reimbursement policy and payroll or expense management system to reflect the new rate for business miles driven on or after July 1, 2026.

Employers are not legally required under federal law to reimburse at the IRS standard mileage rate. However, many organizations choose to do so because it provides a straightforward, IRS-recognized method for reimbursing employees while generally avoiding taxable income when handled under an accountable plan.

Review Your Reimbursement Policies

A mid-year rate change is also a good opportunity to review your travel and expense reimbursement policies. Consider questions such as:

• Are employees accurately tracking business mileage?
• Are managers consistently approving mileage claims?
• Is your reimbursement process easy for employees to follow?
• Are reimbursement rates automatically updated in your payroll or expense management system?

Clear policies help ensure consistency, reduce administrative headaches, and support compliance with IRS accountable plan requirements.

Budget for Higher Reimbursement Costs

Although the increase is only 3.5 cents per mile, the impact can add up for organizations with employees who drive frequently.

For example:

• An employee who drives 5,000 business miles during the second half of the year would receive $175 more in reimbursements than they would have at the previous rate.
• A company with multiple sales representatives, technicians, or field employees could see a noticeable increase in travel reimbursement expenses before year-end.

Now is a good time to revisit travel budgets and reimbursement forecasts to account for the higher rate.

How GTM Can Help

Changes like this are a reminder that employment compliance extends beyond payroll taxes and labor laws. Keeping reimbursement policies current, updating payroll systems, and maintaining compliant accountable plans all require ongoing attention.

GTM helps employers stay ahead of changing regulations with comprehensive payroll processing, HR consulting, and compliance support. Whether you need assistance updating your reimbursement policies, managing employee expenses, or ensuring your payroll practices remain compliant, our experts are here to help you navigate changing requirements with confidence.

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