The Internal Revenue Service (IRS) has released Notice 2026-10, detailing the optional standard mileage rates for 2026, which are critical for determining deductible vehicle operation costs in various contexts including business, charitable, medical, and moving expenses. This new guidance will take effect on January 1, 2026, and includes updates on depreciation basis reduction amounts as well as maximum standard automobile costs for Fixed and Variable Rate (FAVR) plans.
This issuance of Notice 2026-10 stems from an annual study conducted by an independent contractor, which evaluates the fixed and variable costs associated with operating an automobile. It is important to note that while the standard mileage rates are specified in the notice, taxpayers are still required to comply with prior substantiation rules as outlined in Rev. Proc. 2019-46. Taxpayers have the option of substantiating their vehicle use through the standard mileage rate or by maintaining adequate records for actual allowable expenses.
The standard mileage rates for 2026 have been set as follows:
– Business Use: 72.5 cents per mile, an increase of 2.5 cents compared to 2025.
– Medical and Moving: 20.5 cents per mile, a slight decrease of 0.5 cents from the previous year.
– Charitable Use: 14 cents per mile, unchanged from 2025.
Tax practitioners should inform clients that the business standard mileage rate reflects both fixed and variable costs, while the rates for medical and moving purposes are determined solely by variable costs.
Furthermore, recent legislation, specifically the One, Big, Beautiful Bill Act (OBBBA), has influenced the deductibility landscape. Section 70110 of the OBBBA has permanently disallowed all miscellaneous itemized deductions subject to a two-percent floor, impacting the ability to claim unreimbursed employee travel expenses using the business standard mileage rate, with a few exceptions. Notably, members of the Armed Forces, certain state or local government officials, and specific performing artists can still utilize these rates for deductions.
The notice also underscores that the deduction for moving expenses remains suspended for most taxpayers, in accordance with the OBBBA’s stipulations. However, active-duty military members and recently included members of the intelligence community who are moving under military orders will continue to enjoy the moving mileage rate of 20.5 cents.
Additionally, tax professionals managing depreciation schedules need to be aware that the depreciation portion of the business standard mileage rate has increased to 35 cents per mile for 2026, up from 33 cents in 2025, which is vital for calculating basis reductions during vehicle sales.
Regarding employer-provided vehicles, the IRS has set a maximum standard automobile cost of $61,700 for those using FAVR plans, as well as for vehicles made available for personal use in 2026.
As these rates and rules are effective from January 1, 2026, they present an opportunity for taxpayers to optimize their deductions and better track their vehicle-related expenses. Engaging with these updates proactively will ensure compliance and help maximize potential benefits. There remains a hopeful outlook that thorough preparation and understanding of these new provisions will lead to smoother financial practices for individuals and businesses alike.