The Internal Revenue Service (IRS) has announced significant changes to mileage rates that will impact how millions of Americans calculate their driving-related tax deductions in 2026. Starting next year, the rate for business travel will increase to **72.5 cents** per mile, marking a rise of **2.5 cents** from the previous year. Conversely, the mileage rates for medical travel and qualifying moving expenses will decrease to **20.5 cents** per mile, a reduction of **0.5 cents**. The charitable mileage rate remains fixed at **14 cents** per mile, as mandated by law.
The IRS stated that these updated rates reflect annual assessments of both fixed and variable costs associated with vehicle operations, along with necessary inflation adjustments. These rates apply to all vehicle types, including gasoline, diesel, hybrid, and electric models. Taxpayers can choose between using the IRS standard mileage rate or calculating their actual vehicle expenses, but certain rules govern this choice.
Details on Mileage Rate Usage and Deductions
Taxpayers who opt to utilize the standard mileage rate for business use must make this election in the first year the vehicle is placed in service. For leased vehicles, the standard mileage method must be employed throughout the entire lease term, including any renewals.
It is also important to note that most unreimbursed employee travel expenses are no longer deductible as miscellaneous itemized deductions. Certain exceptions do exist for specific groups, including eligible educators, some state and local officials, certain performing artists, and designated members of the Armed Forces and intelligence community. Only active-duty military personnel and some intelligence members can deduct moving expenses associated with a permanent change of station.
New Tax Provisions on Car Loan Interest
This mileage update coincides with new federal guidance regarding a notable tax provision: the “No Tax on Car Loan Interest” initiative, introduced under the One, Big, Beautiful Bill. Treasury and IRS officials have released proposed regulations that clarify how taxpayers can deduct interest paid on qualifying vehicle loans taken out after **December 31, 2024**, specifically for new, domestically assembled vehicles intended for personal use.
This new benefit is particularly significant as it applies to taxpayers who take either the standard deduction or itemize their deductions. The guidance specifies eligibility criteria based on the vehicle’s final assembly location, the calculation of eligible loan interest, and the deduction cap set at **$10,000** per year. Additionally, lenders will face new reporting obligations, required to file information returns detailing the interest received and specific loan details, ensuring taxpayers can accurately claim this deduction.
Public feedback on the proposed regulations can be submitted to Treasury and the IRS through **February 2, 2026**, via Regulations.gov. For further details on the mileage rates and vehicle-related tax provisions, taxpayers are encouraged to visit IRS.gov.
