The federal mileage rate looks like a simple number, but the math behind it is updated annually by the IRS using a detailed study from an outside contractor who tracks average fixed and variable costs of operating a vehicle. The rate moves with fuel prices, maintenance costs, insurance premiums, and vehicle depreciation curves. For employers, using the IRS rate creates a clean, audit-proof way to reimburse employees for driving their own cars on company business, while avoiding the complexity of accountable plan valuations, company car imputations, or per diem structures.
What the 2026 Rate Covers For 2026, the IRS set the business use rate at 70 cents per mile, up slightly from 67 cents per mile in 2024. The medical and moving rate remains at 21 cents per mile (moving applies only to active-duty military under current law). The charitable rate stays at 14 cents per mile, which is set by statute and doesn't change with operating costs.
The business rate includes all vehicle operating costs: fuel, oil, maintenance, repairs, tires, insurance, registration, and depreciation. It does not include parking fees or tolls, which are reimbursable separately.
When Employers Should and Shouldn't Use It Use the IRS rate when employees drive their own vehicles on company business and the employer wants a simple, tax-free reimbursement method. Skip the IRS rate when the employer provides company vehicles, uses a FAVR (Fixed and Variable Rate) reimbursement plan, or operates in a state with its own mileage rate requirements (California, for example, uses a different standard under Labor Code 2802).
What Documentation Does the IRS Require? Employees have to keep contemporaneous mileage logs with date, destination, business purpose, and miles driven. Reconstructing mileage from calendars after the fact doesn't satisfy the substantiation rules under an accountable plan.
How Employers Implement the Federal Mileage Rate Build an accountable plan under Section 62(c). Three requirements apply: the expense has a business connection, the employee substantiates the expense within a reasonable time, and any excess reimbursement is returned within a reasonable time. Reimbursements that meet all three are excluded from the employee's wages and not subject to FIT, FICA, or FUTA.
Reimbursements outside an accountable plan are taxable wages and subject to payroll tax.
Keeping Federal Mileage Rate Reimbursements Clean and Compliant Use expense management software to capture mileage submissions and apply the current IRS rate automatically. Review the rate each January, because the IRS typically announces updates in December effective January 1.
Coordinate with finance on how reimbursements flow through payroll or accounts payable. Link mileage records to broader payroll processes. Review the IRS standard mileage rates page for the current-year numbers and the IRS Publication 463 for the detailed substantiation rules. State-level rules matter too; reference DOL Wage and Hour Division guidance for any state-law overlay on reimbursement obligations.
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