The IRS raised the standard mileage rate to 76 cents per mile effective July 1, 2026, the first midyear increase since 2022. Gas prices jumped 38% between January and July, and the IRS responded by adjusting the rates small business owners use to deduct vehicle expenses and reimburse employees. If you set your mileage rate back in January, you are now using the wrong number.

Here is what changed, why it matters for your tax deduction, and the two documents you need to update this week.

What Is the IRS Standard Mileage Rate for 2026?

For all miles driven on or after July 1, 2026, the rates are:

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

Miles driven between January 1 and June 30, 2026 still use the old rates. That means your 2026 mileage deduction will be calculated with two different rates, which brings us to the first action item.

3 Things Small Business Owners Need to Do Now

1. Split your mileage log at July 1

Your mileage log needs a clear break at July 1. January through June miles are deducted at 72.5 cents. July through December miles are deducted at 76 cents. If your log does not separate the two periods by date, your tax preparer cannot apply the correct rate to each, and you risk either overstating or shortchanging your business mileage deduction.

2. Update your accountable plan documents

If your business reimburses you or your employees for mileage under an accountable plan, the new rate needs to be reflected in two places:

• Your main corporate accountable plan document, so the reimbursement rate on record matches what the business actually pays
• Your Excel reimbursement sheet, so every mileage reimbursement from July 1 forward calculates at 76 cents per mile

This step is what keeps your reimbursements tax-free to employees and deductible to the business. Paying the new rate while your accountable plan documents still show the old one creates an inconsistency you do not want sitting in your records if the IRS ever asks questions.

3. Review any flat car allowances

If you pay a flat monthly car allowance instead of reimbursing actual miles, this is the moment to check whether that allowance still covers your employees' real driving costs at current fuel prices. An allowance that made sense in January may be underpaying your team today.

Why Did the IRS Raise the Mileage Rate Midyear?

Fuel costs. The average price of regular gasoline rose from $2.82 per gallon in early January to $3.89 in mid July, a 38% increase. The IRS made the adjustment in Announcement 2026-11, which modified the original 2026 rates published in Notice 2026-10. Midyear changes are rare. The last one happened in 2022, which is exactly why this one is catching many business owners off guard.

Frequently Asked Questions

What is the IRS business mileage rate for 2026?

72.5 cents per mile for miles driven January 1 through June 30, 2026, and 76 cents per mile for miles driven July 1 through December 31, 2026.

When does the new mileage rate take effect?

July 1, 2026. It applies to all business, medical, and moving miles driven on or after that date.

Do I have to use the standard mileage rate?

No. Businesses can instead deduct actual vehicle expenses such as fuel, maintenance, insurance, and depreciation. The standard mileage rate is the simpler method, but the actual expense method sometimes produces a larger deduction. This is worth reviewing with your accountant, especially for heavier vehicles.

What is an accountable plan?

An accountable plan is a written reimbursement arrangement that lets a business reimburse employees, including owner-employees of S corporations, for business expenses tax-free. To qualify, expenses must have a business purpose, be substantiated with records, and excess reimbursements must be returned. Mileage reimbursed under an accountable plan at the IRS standard rate is not taxable income to the employee.

Sources

• IRS Announcement 2026-11 (official notice)

Need Help Updating Your Accountable Plan?

If you are a Caro & Associates client, reach out and we will update your accountable plan document and reimbursement sheet for you. If you are not a client yet and this midyear change is news to you, that is exactly the kind of thing we keep our clients ahead of. We provide accounting, tax, and payroll services for small businesses and optometry practices nationwide. Contact us to talk about what proactive accounting looks like for your business.