A rideshare driver logging 20,000 miles a year just picked up an extra $500 in tax deductions without changing a single route. That is the practical effect of the IRS raising its standard business mileage rate to 72.5 cents per mile for 2026, up 2.5 cents from the 2025 rate of 70 cents. The new rate took effect January 1, 2026, and it covers gasoline, diesel, hybrid, and electric vehicles equally. For a self-employed consultant putting 15,000 business miles on the odometer, the increase translates to roughly $375 in additional deductions compared to last year’s filing.
Before anyone starts counting savings, though, there is a restriction that catches millions of workers off guard every spring: as of June 2026, most W-2 employees still cannot claim this deduction. The 2017 Tax Cuts and Jobs Act suspended the unreimbursed employee expense deduction through the end of 2025. Congress has not yet restored it for the 2026 tax year, and no legislation currently pending would do so. Until that changes, the mileage rate primarily benefits self-employed workers, independent contractors, gig drivers, and certain Armed Forces reservists.
Where the 72.5-cent rate comes from
The IRS published the new figure in Notice 2026-10, which appeared in Internal Revenue Bulletin 2026-04. A plain-language IRS newsroom summary confirmed the 2.5-cent year-over-year increase and the January 1 effective date. The agency’s own standard mileage rates page lists the 2025 business rate at 70 cents, establishing the baseline for the bump.
The number is not arbitrary. Each year, the IRS commissions a study of fixed and variable costs of operating a vehicle, factoring in fuel, depreciation, insurance, maintenance, and tires. (The agency has never publicly identified the firm that conducts the analysis, but the methodology has been referenced in IRS notices for decades.) The U.S. General Services Administration independently published a matching 72.5-cent reimbursement rate for privately owned automobiles used on official federal travel. When both agencies land on the same figure, it strongly suggests they are drawing from overlapping data on what it actually costs to keep a car on the road.
How the rate has changed since 2019
The 2026 increase extends a mostly upward trend that accelerated during the pandemic-era fuel price spikes:
- 2019: 58 cents
- 2020: 57.5 cents
- 2021: 56 cents
- 2022: 58.5 cents (January through June), then 62.5 cents (July through December, after a rare mid-year adjustment)
- 2023: 65.5 cents
- 2024: 67 cents
- 2025: 70 cents
- 2026: 72.5 cents
That 2022 mid-year correction was unusual. The IRS typically sets the rate once per calendar year, but surging gas prices that summer forced the agency to act twice. Since then, the rate has climbed steadily, reflecting persistent increases in vehicle ownership costs even as gasoline prices pulled back from their 2022 peaks. At 72.5 cents, the 2026 figure is the highest standard business mileage rate the IRS has ever published.
Standard mileage rate vs. actual expenses
The 72.5-cent rate is a simplification. It bundles fuel, depreciation, insurance, repairs, and other costs into a single per-mile figure so filers do not have to track every receipt. But taxpayers are not locked into it. IRS Publication 463 explains that filers may instead deduct actual vehicle expenses, provided they keep adequate records.
Which method saves more money depends on the car and the driver. A rideshare operator running a paid-off, fuel-efficient sedan often comes out ahead with the standard rate because the per-mile figure bakes in depreciation they are no longer incurring. A contractor driving a newer truck with steep loan payments, expensive insurance, and heavy fuel consumption might save more by itemizing actual costs. One timing rule matters here: the IRS requires that you choose the standard mileage rate in the first year a vehicle is placed in service for business if you want the option of using it in later years. Switching from actual expenses to the standard rate later is not allowed.
One clarification that trips people up: the 72.5-cent rate produces a deduction from taxable income, not a dollar-for-dollar tax credit. A self-employed filer in the 22% federal bracket who deducts $7,250 for 10,000 business miles reduces their federal tax bill by roughly $1,595, not $7,250. Self-employment tax savings (the deductible half of the 15.3% SE tax) add to the benefit, and state income tax reductions, where applicable, stack on top of that.
Other 2026 mileage rates
The business rate draws the most attention, but the IRS also updated two other categories for 2026. The rate for medical travel and qualifying military moves is 22 cents per mile. The rate for miles driven in service of a charitable organization remains fixed at 14 cents per mile. That charity rate is set by statute (26 U.S.C. § 170(i)) and has not budged in years, regardless of what happens to fuel or vehicle costs.
What gig workers and EV owners should watch
For the millions of Americans driving for platforms like Uber, Lyft, DoorDash, and Instacart, the 2026 rate is especially consequential. These workers are classified as independent contractors, which means they can claim the full mileage deduction on Schedule C. A full-time rideshare driver putting 30,000 miles on the car annually can deduct $21,750 at the new rate, shaving thousands off their tax bill depending on their bracket.
Electric vehicle owners face a murkier picture. The 72.5-cent rate applies to EVs, but the underlying cost study was built around a vehicle fleet that is still overwhelmingly gas-powered. Electricity prices vary dramatically by state (from roughly 10 cents per kWh in parts of the Mountain West to over 30 cents in New England), and battery depreciation follows a different curve than internal combustion engine wear. The IRS has not issued separate EV-specific mileage guidance, even as electric vehicle registrations continue to grow. For EV owners with low electricity costs, the standard rate may be generous; for those in high-cost electricity markets with expensive battery replacements ahead, actual expenses could be the better play.
Several other gaps in the guidance leave practical questions open. The IRS has not published region-specific cost breakdowns, so a driver in rural Montana, where distances are long and fuel stations sparse, uses the same 72.5-cent figure as a courier in Manhattan. And while the convergence of the IRS and GSA rates may nudge private employers to adopt 72.5 cents as a reimbursement benchmark, there is no published survey data confirming how quickly companies update their internal policies.
How to protect your deduction before filing season
For anyone planning to claim business mileage on a 2026 return, the single most important step is the simplest: start a mileage log now if you have not already. The IRS requires contemporaneous records of the date, destination, business purpose, and miles driven for each trip. Apps like MileIQ, Everlance, and Hurdlr automate the tracking, but a spreadsheet or even a paper notebook works, as long as entries are consistent and made close to the time of each trip. Reconstructing a year’s worth of driving from memory in March is exactly the kind of record-keeping the IRS rejects in audits.
It is also worth running the numbers on both methods before committing. If your actual vehicle costs are high relative to your mileage, the actual-expense method may yield a larger write-off. If your car is older and cheap to operate, the standard rate likely wins. Either way, 72.5 cents per mile is now the benchmark the IRS considers a reasonable cost of business driving, and it is the highest that benchmark has ever been.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
