Overview for Employers and Business Owners
The IRS has released the 2026 standard mileage rates, and the increase in the business mileage rate requires immediate action by employers and business owners. Mileage reimbursement policies directly affect payroll compliance, employee satisfaction, and financial controls. Updating these policies early helps organizations avoid errors and ensure consistent treatment of employee expenses.
2026 IRS Standard Mileage Rates Explained
Effective January 1, 2026, the IRS standard mileage rates are as follows.
The business use rate is 72.5 cents per mile.
The medical use rate is 20.5 cents per mile.
The moving expense rate for qualified individuals is 20.5 cents per mile.
The charitable mileage rate remains 14 cents per mile.
For employers, the business mileage rate is the most important figure. It represents the IRS benchmark for reimbursing employees who use personal vehicles for work related travel.
Why the 2026 Mileage Rate Matters
Mileage reimbursement is more than an administrative task. Reimbursements made under an accountable plan and at or below the IRS standard rate are not taxable to employees. Reimbursements above the IRS rate may result in taxable income and additional payroll reporting obligations.
Employees generally cannot deduct unreimbursed business mileage. As a result, outdated or insufficient reimbursement policies can lead to employee dissatisfaction and retention challenges, especially for roles that require frequent travel.
What Employers Should Change in 2026
Mileage reimbursement policies should be reviewed and updated annually. For 2026, employers should focus on the following actions.
- Update written reimbursement policies to reflect the 72.5 cent business mileage rate effective January 1, 2026.
- Update expense reporting and payroll systems to apply the correct rate automatically.
- Communicate the updated rate clearly to employees and clarify what qualifies as reimbursable business mileage.
- Review state specific reimbursement laws to ensure compliance where mileage reimbursement is required.
- Confirm mileage reimbursements are part of a documented accountable plan with proper substantiation.
Using Technology and AI to Improve Mileage Compliance
Modern expense management platforms use automation and artificial intelligence to calculate mileage, validate trip data, and reduce manual errors. These tools improve audit readiness and provide consistent documentation for reimbursed travel.
Strategic Benefits of Updating Policies Early
Updating mileage reimbursement policies promptly allows businesses to forecast expenses more accurately, strengthen internal controls, improve employee trust, and reduce the risk of payroll and tax issues.
Key Compliance Reminders
The IRS standard mileage rate is optional but widely used as the compliance benchmark. Employers may reimburse less or more, but reimbursements above the IRS rate may create taxable income. Businesses using fixed and variable rate plans should confirm their calculations align with 2026 guidance.
Final Takeaway
The 2026 increase in the standard mileage rate is an opportunity for employers and business owners to review reimbursement practices, modernize expense systems, and reinforce compliance. Proactive updates support financial clarity and a better employee experience.