The US Internal Revenue Service (IRS) has announced updated mileage reimbursement rates for 2026, delivering a larger tax break for workers and self-employed individuals who use personal vehicles for business purposes. The adjustment reflects rising fuel prices, maintenance costs, and overall inflation pressures that have reshaped the cost of transportation over the past year.
Under the new guidance, taxpayers will be able to deduct a higher amount per mile driven for qualified business travel when filing their 2026 tax returns. The IRS said the revision is based on an annual study of both fixed and variable vehicle operating costs, including fuel, insurance, repairs, and depreciation.
For employees who are eligible to claim unreimbursed business expenses, as well as freelancers, contractors, and small business owners, the change effectively lowers taxable income by increasing allowable deductions tied to work-related travel. Employers that reimburse staff using IRS mileage benchmarks are also expected to adjust their internal policies to align with the new rates.
Tax professionals say the update is particularly significant for workers in sales, logistics, healthcare, and the gig economy, where personal vehicle use is common and mileage costs can add up quickly over a year. While the IRS has maintained separate mileage standards for charitable activities and medical or moving-related travel, the business mileage rate remains the most widely used.
The IRS advised taxpayers to keep detailed mileage logs and supporting records throughout the year to ensure compliance and maximize deductions when filing. Employers were also encouraged to clearly document reimbursement policies to avoid disputes during audits.
The revised mileage rates take effect at the start of the 2026 tax year and will apply to miles driven from January 1 onwards.
Nigeria keeps tax holidays for 149 firms despite new tax law
