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2026 Mileage Rate Unveiled: Maximizing Your Deductions

The Internal Revenue Service (IRS) has unveiled the inflation-adjusted 2026 optional standard mileage rates, pivotal for accurately assessing the deductible expenses of using a vehicle for business, charitable, medical, or moving reasons. This announcement is crucial for business owners aiming to optimize their deductions and maintain precise financial records.

Effective January 1, 2026, the updated mileage rates are as follows:

  • 72.5 cents per mile for business travel, including a 35-cent-per-mile depreciation component—an increase from 70 cents in 2025.

  • 20.5 cents per mile for medical travel and eligible moving expenditures, slightly reduced from 21 cents in 2025.

  • 14 cents per mile for services rendered to charitable organizations.

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The business mileage rate stems from a comprehensive evaluation of the fixed and variable costs associated with automobile operation. In contrast, the rates for medical and moving purposes emphasize variable costs from the same analysis. The charitable mileage rate, unchanged for over 25 years, remains legislated at 14 cents unless altered by Congress.

Under the One Big Beautiful Bill Act (OBBBA), moving expense deductions are generally not allowed except for active military relocating under official orders and intelligence community members who relocate due to an assignment change starting in 2026. When using a personal vehicle for charity, an itemizing taxpayer may deduct directly related out-of-pocket costs. Excluded are general repair, maintenance, or registration expenses.

Considerations for Business Vehicle Use: Taxpayers can calculate actual vehicle costs instead of relying on standard rates. Fluctuating fuel prices and changes in bonus depreciation—reinstated to 100% for 2025—could favor actual expense calculations in a vehicle’s initial business use year. However, the standard rates aren’t applicable if prior depreciation methods were used on the vehicle, such as Section 179 or MACRS. This rule applies independently for each vehicle and excludes vehicles for hire or fleets exceeding four cars.

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Business owners using standard mileage often overlook additional deductible expenses such as parking, tolls, and business-attributable vehicle property taxes.

Employer Reimbursements: Employer mileage reimbursements are tax-free when employees substantiate the details of work-related travel.

Employee Vehicle Expenses: Post-Tax Cuts and Jobs Act, employee auto expenses are non-deductible unless they are for the military reserves, government officials, performing artists, or eligible educators—these can adjust their income accordingly up to the federal limits.

Self-Employed Taxpayers: can deduct business vehicle use, additionally deducting the interest portion of an auto loan on Schedule C.

Heavy SUVs Accelerated Write-Offs: SUVs exceeding 6,000 pounds leverage Section 179 and bonus depreciation for substantial deductions, subject to weight restrictions. Disposal within five years incurs potential recapture of Section 179 deductions.

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Wondering how to maximize these deductions or what documentation is essential? At GeneralCents Accounting, we specialize in transforming stress over finances into clear, strategic action. Contact us for guidance to make the most of your vehicle’s business use.

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