IRS Boosts Mileage Rate, Makes Other Updates for 2026

IRS has released 2026 mileage rates and other updates impacting employees who drive personal vehicles for work or employer-provided vehicles.

First, IRS said in a recent notice that the business standard mileage rate for 2026 is 72.5 cents per mile.

That’s a 2.5-cent increase over the 2025 mileage rate of 70 cents per mile.

The standard mileage rate has been steadily climbing in recent years:

• 58.5 cents per mile — first half of 2022
• 62.5 cents per mile — second half of 2022
• 65.5 cents per mile — 2023
• 67 cents per mile — 2024
• 70 cents per mile — 2025, and
• 72.5 cents per mile — 2026

Year-end reminder: If you’re relying on the business standard mileage rate, use the rate in effect when the employee was on the road, not when the expense report was submitted.

In its December 29, 2025, notice, IRS also released the portion of the business standard mileage rate treated as depreciation. That’ll be 35 cents per mile, up from 33 cents per mile.

Additional Mileage Rates

In its year-end notice, the IRS announced that some rates would decrease by half a cent.

The rate for miles driven for medical purposes will decrease to 20.5 cents per mile in 2026, the IRS said.

The same rate will apply to miles driven for moving purposes – however, only select individuals may use this rate. They are:  qualified active-duty members of the Armed Forces (due to the Tax Cuts and Jobs Act of 2017) and certain members of the intelligence community (due to the One Big Beautiful Bill Act).

As usual, the rate for miles driven in service to charitable organizations will remain 14 cents per mile. This rate is set by statute.

Next, in 2026 when computing the allowance under a fixed and variable rate (FAVR) plan, the standard automobile cost can’t exceed $61,700. That’s an increase, compared with the 2025 amount of $61,200.

The amount is important for any employers that use a FAVR plan to reimburse employees for driving their personal vehicles for business.

The FMV of Vehicles

Notice 2026-10 includes updates that apply to employers using the vehicle cents-per-mile valuation rule or the fleet-average valuation rule to calculate the cost of personal use of an employer-provided vehicle.

Specifically, IRS changed the maximum fair market value (FMV) info needed for those valuation methods. The maximum FMV of vehicles on the date they’re first made available to employees is increasing from $61,200 to $61,700.

If the FMV of such vehicles exceeds that amount, you’ll need to use another valuation method to make sure you’re correctly withholding any income and employment taxes.

Providing More in Transportation Benefits

In an earlier announcement, Revenue Procedure 2025-32, IRS released new numbers for employers that make transportation benefits available to employees.

IRS said that in 2026, you can exclude up to $340 per month from an employee’s income if you provide:

• Rides in a commuter highway vehicle between that person’s home and workplace
• Transit passes, and/or
• Qualified parking.

That’s up from $325 per month in 2025.

Of course, it’s never “cruise-control mode” when it comes to fringe benefits.

For example, if you offer payments for rides in a commuter highway vehicle, double-check whether at least 80% of the vehicle’s mileage is for transporting employees back and forth between their homes and workplaces. Another requirement, based on your reasonable expectations, is that employees should occupy at least half of the vehicle’s seats (but don’t count the driver).

Also, consider how qualified transportation fringe benefits coordinate with other fringe benefits. For example, the IRS says a working condition fringe benefit and a de minimis fringe benefit can’t include a qualified transportation fringe benefit.

However, there may be certain exceptions, such as if you’re providing a fringe benefit to a person other than an employee.