IRS hands workers bigger tax break for business expenses in 2026
People who use their cars for work will be able to deduct more money per mile on their taxes in the new year.
The Internal Revenue Service (IRS) announced this week that the standard mileage rate for business driving will increase by 2.5 cents per mile. Additionally, vehicles used for medical purposes will decrease by half a cent, which the agency said reflects "updated cost data and annual inflation adjustments."
The standard mileage rate is an IRS-set figure, which is expressed in cents per mile, that is used to calculate the deductible costs of using a personal vehicle for business purposes when filing federal income taxes. Self-employed individuals, gig workers, freelancers, and small businesses who use personal vehicles for business can claim the standard mileage deduction on their tax returns. However, the standard mileage rate is also calculated for vehicles used for medical purposes, moving purposes for active duty members and for charity work.
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Overall, starting Jan. 1, the standard mileage rates for the use of a car, van, pickup or panel truck will be 72.5 cents per mile driven for business use, 20.5 cents per mile driven for medical purposes, 20.5 cents per mile driven for moving purposes for certain active-duty members of the Armed Forces and certain members of the intelligence community. But the rate per mile driven in service of charitable organizations will remain at 14 cents, the IRS said.
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The aforementioned rates apply to fully-electric and hybrid automobiles, as well as gasoline and diesel-powered vehicles. If taxpayers are using a leased vehicle, the standard mileage rate must be applied for the entire lease period, including renewals.
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The rate for medical and moving purposes, meanwhile, is based only on costs that increase when you drive more, such as gas, oil changes, and basic vehicle maintenance.
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However, the IRS noted that the standard mileage rate is optional for taxpayers. They can instead calculate the actual costs of using their vehicle.