IRS raises business mileage rate to 76 cents per mile

The Internal Revenue Service (IRS) has announced a midyear increase to the optional standard mileage rate for business use of a vehicle, raising the rate from 72.5 cents to 76 cents per mile beginning July 1, 2026. While the increase is welcome news for taxpayers facing higher fuel costs, the midyear effective date creates new reporting and administrative considerations for tax professionals.

The July 1 effective date changes everything

The biggest takeaway is that 2026 returns may require two separate mileage calculations.

Business mileage driven from Jan. 1 through June 30, 2026, must be calculated using the 72.5-cent rate. Business mileage driven from July 1 through Dec. 31, 2026, qualifies for the new 76-cent rate.

The rate for eligible medical and moving mileage also increases from 20.5 cents to 23.5 cents per mile beginning July 1.

Example: A self-employed consultant drives 8,000 business miles during the first half of 2026 and 12,000 business miles during the second half. The first 8,000 miles generate a deduction of $5,800 (8,000 × 72.5 cents). The remaining 12,000 miles generate a deduction of $9,120 (12,000 × 76 cents), for a total deduction of $14,920.

If the taxpayer applies the 76-cent rate to all 20,000 miles, the deduction would be overstated. This example highlights why separate mileage records for each period are essential.

Clients who provide only an annual mileage total may not have enough information to calculate the deduction correctly. Now is a good time to remind clients to maintain separate mileage records for each period.

Will your organizers capture the right information?

Many tax organizers ask for total business mileage for the year. Consider revising organizers to request mileage for the first half and second half of the year separately. Gathering the information up front can reduce follow-up questions and improve return preparation efficiency.

Questions to consider adding include:

• Business miles driven Jan. 1 through June 30
• Business miles driven July 1 through Dec. 31
• Medical miles, if applicable
• Qualified moving miles, if applicable

Updating organizers now can help prevent delays when preparing 2026 returns.

Can your software handle the split-year calculation?

Practitioners should verify that their tax software correctly applies the two mileage rates. This is especially important for firms importing mileage data from bookkeeping systems, spreadsheets or mileage-tracking applications.

Review software updates before filing season and confirm that mileage entered for each period is calculated using the appropriate rate. A small calculation error could affect deductions across multiple returns.

The mileage rate change may also require updates to internal workflows, templates and client questionnaires. Addressing these issues now can help avoid surprises when filing season begins.

A mileage rate change means reimbursement plans need attention

The rate increase also affects employers that reimburse employees for business travel under accountable plans.

The new 76-cent rate applies to mileage allowances paid on or after July 1, 2026, for transportation expenses incurred on or after that date. Employers using accountable plans should update reimbursement procedures, payroll systems and internal policies to reflect the new rate.

Tax professionals may want to notify business clients now so they have time to implement changes and communicate them to employees before reimbursement requests begin arriving.

Good mileage records matter more than ever

The standard mileage rate simplifies vehicle expense calculations, but it does not eliminate substantiation requirements. Taxpayers still need records showing the date, destination, business purpose and miles driven for each trip.

Because two rates apply in 2026, accurate mileage logs are more important than ever. Clients who use mileage-tracking applications should confirm they can generate reports for both periods. Those relying on spreadsheets or paper logs should clearly separate mileage before and after July 1, 2026.

What tax professionals should do now

The July 1 effective date means tax professionals should begin preparing now by educating clients, updating organizers, reviewing software calculations and discussing reimbursement plan changes with business clients.

By addressing these issues before year end, practitioners can reduce filing season complications and help clients maximize the benefit of the increased mileage rate.