The IRS Raised the Mileage Rate Mid-Year. Most Businesses Haven't Noticed.

The IRS almost always sets one mileage rate for the whole year in December and leaves it alone. Occasionally, when fuel costs move sharply, it changes the rate mid-year. That happened in 2026.

January 1 through June 30, 2026: 72.5 cents per mile for business use. July 1 through December 31, 2026: 76 cents per mile for business use.

The medical and moving rate also increased, from 20.5 cents to 23.5 cents per mile, over the same split.

This came through an amendment to the original 2026 mileage notice. It received a fraction of the attention that the December announcement gets, which is why a great many businesses, bookkeepers, and expense systems are still running on 72.5 cents.

What this means in practice

You now have two rates for one tax year, and the rate that applies depends on when the miles were driven — not when you logged them, submitted them, or got reimbursed.

For a business owner driving 18,000 business miles a year, split evenly across the halves:

At a flat 72.5 cents, the deduction is $13,050. At the correct split rates, it's $6,525 for the first half plus $6,840 for the second, or $13,365. The difference is $315 of deduction from getting the rate right.

That's modest for one vehicle. For a service business with six vehicles and heavy driving, it stops being modest.

Four things to check this week

Your mileage log separates the halves. If your log records dates, this is straightforward. If it records monthly totals without dates, you can still split at June 30, but you need the underlying detail to support it. Logs that only capture an annual total are a problem for reasons beyond the rate change.

Your accounting system has both rates. Many systems store a single rate per year. Confirm yours handles a mid-year change, or that someone is applying the correct rate manually.

Your employee reimbursement rate was updated on July 1. This is the one with real consequences. If you reimburse employees at the standard rate and you're still paying 72.5 cents for post-July miles, you're under-reimbursing them. Employees generally cannot deduct unreimbursed business mileage on their personal returns, so the shortfall lands entirely on them.

Conversely, reimbursing above the standard rate isn't prohibited, but the excess is generally treated as taxable wages. If you set a rate above 76 cents, that piece needs to run through payroll.

Your expense app is current. Automatic mileage tracking apps generally update their rates, but not always immediately, and not always for the mid-year change specifically. Verify rather than assume.

Standard rate versus actual expenses

The standard mileage rate is one of two methods. The alternative is deducting actual expenses — fuel, insurance, repairs, maintenance, registration, and depreciation — multiplied by the business use percentage.

The standard rate is simpler and requires less recordkeeping. Actual expenses often produce a larger deduction for expensive vehicles, vehicles with high operating costs, or vehicles eligible for substantial depreciation.

An important constraint: if you want the option to use the standard rate for a vehicle you own, you generally must use it in the first year the vehicle is placed in service. Start with actual expenses and you're typically locked into that method for that vehicle. For leased vehicles, the method chosen must be used for the entire lease term. This is a decision worth making deliberately when a vehicle enters service, not by default.

The log is what matters

Whichever method you use, the substantiation requirement is the same and it's where deductions are most often lost. The IRS expects a record showing the date, the business purpose, the destination, and the miles for each trip.

A reconstructed log built at year-end from calendar entries and memory is weak evidence. A contemporaneous log — recorded at or near the time of travel, whether on paper or through an app — is strong evidence.

Commuting between home and your regular place of business is not deductible business mileage, no matter how far it is. Travel between work locations, to client sites, to the bank, or to pick up supplies generally is. If you have a qualifying home office as your principal place of business, the analysis changes and more of your driving may qualify.

Looking ahead

Because the mid-year change was driven by fuel costs, the 2027 rate announced in December will be built off different assumptions than usual. It's worth confirming rather than carrying forward.

This article is general information, not tax advice for your specific situation. Mileage rates and substantiation rules change. Please talk with us before acting on anything here.