Through Announcement 2026-11, the Internal Revenue Service (IRS) increased the optional standard mileage rates for the second half of 2026, citing recent increases in fuel prices. The change modifies the rates originally set in Notice 2026-10.
The business standard mileage rate increases from 72.5 cents to 76 cents per mile, and the medical and moving rate increases from 20.5 cents to 23.5 cents per mile. The charitable rate remains 14 cents per mile because it is set by law rather than adjusted by the IRS.
This update applies to employers who use the IRS standard rate for reimbursement of employee business-related travel.
What Employers Need to Do
- No federal law requires employers to reimburse mileage at the IRS standard rate. However, employers that choose to use the IRS rate should apply the correct rate for the correct period: 72.5 cents per mile for business travel from January 1 through June 30, 2026, and 76 cents per mile for business travel on or after July 1, 2026.
- To keep mileage reimbursements tax-free, ensure they meet IRS accountable plan requirements: the travel must have a business connection, employees must substantiate the mileage within a reasonable time, and any excess reimbursement must be returned. Reimbursements that fail these requirements become taxable wages subject to payroll taxes and Form W-2 reporting.
- Employers using the cents-per-mile method to value an employee’s personal use of a company vehicle should apply the updated rate as required under the applicable IRS valuation rules.
Overview
New Rates Effective July 1, 2026
- Business use: 76 cents per mile (up from 72.5 cents).
- Medical and moving purposes: 23.5 cents per mile (up from 20.5 cents).
- Charitable use: 14 cents per mile (unchanged, set by statute).
How the Rates Apply by Period
- The 72.5-cent business rate continues to apply to business travel that occurred between January 1 and June 30, 2026.
- The 76-cent business rate applies to transportation expenses paid or incurred on or after July 1, 2026, and to reimbursements paid on or after July 1, 2026, for travel that occurred on or after that date.
Other Details
- The rates apply to all vehicle types, including electric, hybrid-electric, gasoline, and diesel vehicles.
- Employers may use the standard rate to reimburse employees who use personal vehicles for business travel, and to value personal use of certain employer-provided vehicles under the cents-per-mile method.
- Moving-expense deductions remain limited to certain active-duty military personnel and certain intelligence community employees who meet federal eligibility requirements.
- All other provisions of Notice 2026-10 remain unchanged.
Why This Matters
The midyear increases means employers that reimburse business mileage using the IRS rate need to apply two different rates within the same calendar year: 72.5 cents through June 30 and 76 cents beginning July 1. Employers should update payroll and expense systems promptly to apply the correct rate based on the travel date, both to keep reimbursements accurate and to avoid tax complications from over- or under-reimbursement.
Key Risks for Employers
- Reimbursing more than the IRS standard rate without adequate substantiation under an accountable plan, may cause the excess to be treated as taxable wages, creating payroll tax and Form W-2 reporting obligations.
- Some states, such as California, require employers to reimburse necessary business expenses. Under-reimbursing mileage in those states may create state-law liability independent of the IRS rate.
- Using the 76-cent rate for travel before July 1, 2026 (or the 72.5-cent rate for travel on or after that date) may result in inaccurate reimbursements and potential tax or recordkeeping issues.
Additional Information
The official source is IRS Announcement 2026-11, published in Internal Revenue Bulletin 2026-29. The IRS made the midyear adjustment because of rising fuel prices, which is unusual, as the standard mileage rate is typically adjusted only once per year at the start of the calendar year.
Source References
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