Every year, the IRS updates the standard mileage rate for business use, establishing a tax-free reimbursement threshold for U.S. employers alongside individual tax deductions. Since 1981, Motus has been instrumental in providing cost data and analysis that informs the IRS’s business mileage standards. In 2026, this rate has been set at 72.5 cents per mile, a notable increase from the 2025 rate of 70 cents.
This adjustment reflects various cost dynamics across the nation. While fuel prices have seen a decrease, the extent of this decline varies significantly by region: the Midwest saw a reduction of 5.93%, the Northeast experienced a drop of 6.82%, the South recorded a 7.16% decrease, and the West decreased by 2.6%. Despite the relief these fuel price changes bring, non-fuel costs—such as insurance, maintenance, and vehicle depreciation—continue to rise, which affects overall vehicle ownership expenses more than fuel costs alone. This underscores the necessity for companies to recognize that a national average rate, while beneficial for compliance, may not accurately reflect the true costs experienced by individual organizations.
The IRS standard mileage rate serves critical functions: it defines the tax-free reimbursement threshold for employers, establishes a compliance baseline, and aims to ensure fairness in reimbursements. However, it is crucial for businesses to understand that the rate is an average and does not account for regional cost fluctuations or the varying driving patterns within their employee base. This limitation can lead to situations where organizations might only meet the bare minimum instead of addressing the actual costs faced by their employees.
As businesses navigate these changes, they face a unique opportunity to reassess how fair and accurate their reimbursement strategies are. Organizations should regularly review whether their current approaches reflect true expenses, especially since costs can vary significantly from year to year and by region. Compliance also requires diligent record-keeping practices, including detailed mileage logs that capture essential trip information. Embracing automated technology can streamline these tasks, improving accuracy and reducing administrative burdens.
For 2026, businesses have several reimbursement options designed to fit various employee needs. The Cents-Per-Mile (CPM) approach is ideal for those with low annual mileage or seasonal roles, being easy to administer and closely tied to actual driving distances. However, it may fall short in accuracy when mileage varies significantly among employees or across regions. Alternatively, the Fixed and Variable Rate (FAVR) model provides a more nuanced solution for dispersed teams, combining fixed ownership costs and variable operating expenses. Although it requires a more complex setup, it offers enhanced accuracy that supports organizations needing to align reimbursements with diverse driving patterns.
Motus stands as a leader in assisting organizations with compliance and program design related to the IRS standard mileage rate. By offering tools that support IRS-ready substantiation, AI-powered mileage classification, and location-specific rate modeling, Motus equips businesses to ensure they maintain compliance, control costs, and foster employee satisfaction—all paramount in this evolving landscape of mobile workforces.