The IRS has set the standard mileage rate for vehicles used for business purposes for 2026, raising it by 2 1/2 cents from 2025, the agency said in a Dec. 29 statement.

If a company uses a car for business purposes, some of the operating costs, subject to certain limits, can be deducted when calculating taxes. The deductible amount can be calculated by the standard mileage rate or the actual expense method, with the former being determined by the IRS based on an annual study of fixed and variable costs related to operating a vehicle.

Starting on Jan. 1, 2026, the standard mileage rates for the use of a car, van, pickup truck, or panel truck will be set at 72 1/2 cents per driven mile, a 2 1/2-cent increase from 2025, according to the IRS.

In addition to business, mileage rates can be used for calculating deductions for vehicles used for charitable and medical purposes.

For medical purposes, the rate is set at 20 1/2 cents per mile for 2026, down by 1/2 cent from 2025, according to the IRS. For charitable purposes, the rate will be unchanged from 2025, at 14 cents per driven mile.

“Additionally, the optional standard mileage rate may be used to calculate the deductible costs of operating vehicles for moving purposes for certain active-duty members of the Armed Forces, and now, under the One, Big, Beautiful Bill, certain members of the intelligence community,” the IRS stated.

This rate is now set at 20 1/2 cents for 2026, which is 1/2 cent lower than in 2025, according to the agency.

The IRS clarified that the updated rates apply to gas- and diesel-powered vehicles, as well as fully electric and hybrid automobiles.

“Taxpayers using the standard mileage rate for a vehicle they own and use for business must choose to use the rate in the first year the automobile is available for business use. Then, in later years, they can choose to use the standard mileage rate or actual expenses,” the agency stated.

“For a leased vehicle, taxpayers using the standard mileage rate must employ that method for the entire lease period, including renewals.”

In a Dec. 29 statement, vehicle reimbursement and risk mitigation solutions company Motus said overall driving costs have changed nationwide, including higher vehicle prices, increased maintenance costs (such as insurance and repair costs), and high fuel prices that remained elevated despite a dip this year.

“The IRS standard mileage rate increase this year underscores how essential driving for work remains to both operational and financial performance,” Motus CEO Phong Nguyen said.

“Ensuring fair and accurate reimbursement is more important than ever; it helps organizations meet their budget goals while better supporting the employees who rely on their personal vehicles to get the job done.”

The IRS has used Motus data since 1981 when determining standard mileage rates, according to the company.

In a Dec. 29 blog post, Motus noted that while IRS standard mileage rates typically reflect cost trends at the national level, they cannot account for factors such as regional volatility and the wide range of vehicle types that workers use.

“As a result, the IRS standard mileage rate often becomes a floor, not a reflection of true cost,” it stated.

To use the standard mileage rate, a business cannot operate five or more vehicles at the same time, such as in a fleet operation, according to the agency’s Sept. 24 statement.

Some businesses may qualify to use both the standard mileage rate and the actual expense method to calculate deductions. “[In such situations,] you may want to figure your deduction both ways before choosing a method to see which one gives you a larger deduction,” the IRS stated.