WASHINGTON, D.C. — The Internal Revenue Service is reshaping how millions of Americans calculate driving-related tax deductions in 2026, raising the standard mileage rate for business travel while trimming rates tied to medical and moving expenses, according to an announcement released in late December.
In 2026, taxpayers who use their vehicles for business purposes can deduct 72.5 cents per mile, an increase of 2.5 cents from the 2025 rate. At the same time, the mileage rate for medical travel and qualifying moving expenses will drop to 20.5 cents per mile, down half a cent. The charitable mileage rate remains unchanged at 14 cents per mile, a figure set by statute.
The IRS said the updated rates reflect annual studies of the fixed and variable costs of operating a vehicle, along with inflation adjustments. The rates apply equally to gasoline, diesel, hybrid, and fully electric vehicles.
Standard mileage rates are optional, allowing taxpayers to choose between using the IRS rate or calculating actual vehicle expenses. However, rules apply. Taxpayers who own a vehicle and elect the standard mileage rate for business use must do so in the first year the vehicle is placed in service. For leased vehicles, the standard mileage method must be used for the entire lease period, including renewals.
The agency also reminded taxpayers that most unreimbursed employee travel expenses are no longer deductible as miscellaneous itemized deductions. Exceptions remain for certain groups, including eligible educators, some state and local officials, certain performing artists, and specific members of the Armed Forces and intelligence community. Only active-duty military members and certain intelligence personnel may deduct moving expenses tied to a permanent change of station.
The mileage update arrives alongside new federal guidance on a separate, high-profile tax change: the “No Tax on Car Loan Interest” provision enacted under the One, Big, Beautiful Bill. Treasury and IRS officials released proposed regulations clarifying how taxpayers can deduct interest paid on qualifying vehicle loans taken out after December 31, 2024, to purchase new, made-in-America vehicles for personal use.
Unlike many deductions, the new car loan interest benefit applies to taxpayers who take the standard deduction as well as those who itemize. The guidance outlines which vehicles qualify based on U.S. final assembly, how eligible loan interest is calculated, and who may claim the deduction, which is capped at $10,000 per year.
The proposal also spells out new reporting obligations for lenders, who must file information returns detailing interest received and loan specifics so taxpayers can properly claim the deduction. Additional transition rules apply to interest paid during 2025.
Treasury and the IRS are accepting public comments on the proposed regulations through February 2, 2026, via Regulations.gov. More information on the mileage rates and vehicle-related tax provisions is available on IRS.gov.
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