IRS Standard Mileage Rate increases July 1, 2026 due to rise in fuel cost
In an unusual move to reflect the drastic increase in gasoline prices, the Internal Revenue Service recently made a mid-year announcement that the optional standard mileage rates for computing the deductible costs of operating an automobile for business, medical, or moving expense purposes and for determining the reimbursed amount of these expenses that is deemed substantiated will increase by 3.5 cents beginning July 1, 2026.
Optional standard milage rates are used to calculate the deductible costs of operating vehicles for business, charitable and medical purposes, as well as for active-duty members of the Armed Forces who are moving.
The revised standard mileage rates are:
(1) Business use: 76 cents per mile
(2) Medical and moving purposes: 23.5 cents per mile
The mileage rate that applies to the deduction for charitable contributions is fixed under § 170(i) of the Internal Revenue Code at 14 cents per mile.
The revised standard mileage rates set forth in the IRS announcement apply to deductible transportation expenses paid or incurred for business, medical, or moving expense purposes on or after July 1, 2026, and to mileage allowances that are paid both (1) to an employee on or after July 1, 2026, and (2) for transportation expenses paid or incurred by the employee on or after July 1, 2026.
The standard mileage rates set forth in Notice 2026-10 continue to apply to deductible transportation expenses paid or incurred for business, medical, or moving expense purposes before July 1, 2026, and to mileage allowances paid (1) to an employee before July 1, 2026, or (2) with respect to transportation expenses paid or incurred by the employee before July 1, 2026.
The rates apply to fully-electric and hybrid automobiles, as well as gasoline and diesel-powered vehicles.
Businesses typically use the IRS standard mileage rate as a point of reference for reimbursing employees for the business use of their vehicles. Other options for employers are available so long as they comply with section 2802 of the Labor Code which mandates that employees be reimbursed for “all necessary expenditures or losses incurred by the employee.” California courts and labor agencies have declared that the IRS standard mileage rate in fact fulfills this employer obligation. Employees may opt to calculate the actual costs of using their own vehicle instead of using the standard mileage rates but we do not recommend this method. Employers should ensure that their employee reimbursements account for these updated amounts.
Ensure you are reimbursing employees who use their personal vehicles to move to different work locations during the course of the workday. This does not their normal commute expenses to and from jobsites.
Here at Rosasco Law Group, we strive to help our clients stay up-to-date with any and all employment and labor law compliance issues. Please contact our office for more information.
