Happy New Year—and happy news for anyone who drives for work. As of January 1, 2026, the Internal Revenue Service has raised the standard mileage rate for business use of automobiles to 72.5 cents per mile, up 2.5 cents from the 70-cent rate that applied in 2025.

The increase, announced in IRS Notice 2026-10, reflects the rising costs of operating a vehicle in America—from fuel prices to insurance premiums to maintenance expenses. For self-employed workers, gig economy drivers, and business owners who rack up significant miles, the higher rate translates directly into lower tax bills.

The 2026 Mileage Rates at a Glance

The IRS sets different rates for different types of driving. Here's the complete breakdown for 2026:

  • Business use: 72.5 cents per mile (up 2.5 cents from 2025)
  • Medical purposes: 20.5 cents per mile (down 0.5 cents from 2025)
  • Moving purposes: 20.5 cents per mile for qualifying active-duty military and intelligence community members (down 0.5 cents)
  • Charitable purposes: 14 cents per mile (unchanged, as this rate is set by statute)

Who Benefits Most

The mileage rate increase is particularly valuable for workers who put significant miles on their personal vehicles for business purposes:

Gig Economy Workers

Uber drivers, DoorDash couriers, and other gig workers can deduct business miles at the new rate. For a rideshare driver who logs 30,000 miles per year for work, the 2.5-cent increase means an additional $750 in deductions—potentially reducing their tax bill by $150 to $200 depending on their tax bracket.

Sales Professionals

Outside sales representatives who drive to client meetings can accumulate tens of thousands of business miles annually. Self-employed salespeople can claim the full deduction, though employees should note important limitations (more on that below).

Small Business Owners

Entrepreneurs who use their personal vehicles for business—whether driving to meet suppliers, visiting job sites, or making deliveries—can deduct those miles at the new rate.

"The standard mileage rate is one of the simplest and most valuable deductions available to self-employed taxpayers. Tracking your miles religiously can save you thousands of dollars per year."

— Eric Bronnenkant, Head of Tax at Betterment

The Employee Limitation

Here's an important caveat that many workers don't realize: if you're a W-2 employee, you generally cannot deduct unreimbursed business mileage on your federal tax return.

The One Big Beautiful Bill Act made permanent the suspension of miscellaneous itemized deductions subject to the 2% floor, which includes unreimbursed employee business expenses. This means that unless your employer reimburses you for business mileage, you're out of luck at the federal level.

Some exceptions apply:

  • Armed Forces reservists: Can deduct travel expenses related to reserve duties
  • Performing artists: Qualified performing artists may deduct business expenses
  • State and local officials: Those paid on a fee basis can claim certain deductions
  • Educators: Teachers can deduct up to $300 in classroom expenses, including some travel

Standard Rate vs. Actual Expenses

The standard mileage rate is convenient, but it's not always the best option. Taxpayers can choose to deduct actual vehicle expenses instead, including:

  • Gas and oil
  • Repairs and maintenance
  • Insurance
  • Depreciation (subject to limits)
  • Lease payments
  • Registration fees and tolls

The catch: you must track all these expenses meticulously and calculate the business-use percentage of your vehicle. For most people, the standard mileage rate is simpler and often produces a comparable or better result.

When Actual Expenses Win

Actual expenses typically beat the standard rate when:

  • You drive an expensive vehicle with high depreciation
  • Your vehicle has low fuel efficiency
  • You had significant repairs during the year
  • Your business-use percentage is very high (80%+)

How to Track Your Miles

The IRS requires "adequate records" to claim the mileage deduction. This means documenting:

  • Date of each business trip
  • Destination and business purpose
  • Miles driven for each trip
  • Total business miles for the year

Several smartphone apps can automate this tracking, including MileIQ, Stride, and Everlance. Many of these apps use GPS to detect when you're driving and prompt you to categorize trips as business or personal.

What About Electric Vehicles?

Yes, the standard mileage rate applies to electric and hybrid vehicles, not just gasoline and diesel cars. This can be particularly advantageous for EV owners, since their actual fuel costs are typically lower than gasoline vehicles, but they receive the same per-mile deduction.

The Bottom Line

The 2.5-cent mileage rate increase might seem small, but it adds up quickly for heavy drivers. Here's how much the increase is worth at various mileage levels:

  • 10,000 business miles: $250 additional deduction
  • 20,000 business miles: $500 additional deduction
  • 30,000 business miles: $750 additional deduction
  • 50,000 business miles: $1,250 additional deduction

If you're in the 22% tax bracket, those deductions translate to tax savings of $55 to $275. In the 32% bracket, the savings range from $80 to $400.

The key is actually tracking your miles. Studies suggest that most gig workers and self-employed individuals significantly undercount their business mileage, leaving money on the table at tax time. Starting fresh on January 1 with a mileage tracking app could be one of the simplest New Year's resolutions that actually pays off.