What the 2026 Standard Mileage Rate Increase Says About Driving Costs

Have you heard the news? It’s a new year, and that means that the Internal Revenue Service has announced the standard mileage rate for 2026, based on its analysis of average national costs of owning and operating a vehicle. The IRS rate for mileage reimbursement has steadily climbed for the last five  years, with 2021 being the last time the rate saw a decrease (from 57.5 to 56 cents per mile). Ahead of 2026, the IRS set the rate at 72.5 cents per business mile, up 2.5 cents from 2025’s rate of 70 cents per mile. 

What accounts for this latest rate hike, and what might it mean for your business? Let’s take a closer look. 

Why Did the Rate Increase This Year?

The standard mileage rate is not a predictive figure but a reactive one, shaped by all the supply line shifts, market fluctuations, and countless other factors that impact vehicle costs. According to a recently updated CompanyMileage analysis, the IRS considers multiple cost factors when evaluating nationwide vehicle ownership and operating costs to determine the mileage rate. The biggest factor, the analysis found, is depreciation, which accounts for 28.3% of overall costs, with fuel costs on its heels at about 21%. Insurance coverage makes up 16.2%, financing 12.5%, licenses, registration, and taxes 7.7%, and maintenance, tires, and repair costs 14.3%.

Based on the trajectory of the last five years, the 2026 standard mileage rate doesn’t strike those of us at CompanyMileage as particularly surprising. We actually predicted near the end of last year that we were in for another rate hike. The writing, after all, seemed to remain on the wall. 

Between 2024 and 2025, the mileage rate increased by 3 cents. At the time, we attributed that increase to rising costs of (new and used) vehicles, sky-high auto insurance rates, and upward trends in maintenance and repair costs. Unfortunately, that hasn’t changed significantly.

What This Increase Tells Us About Car Expenses in 2026

Like many things, the sharp and lasting increase in vehicle ownership costs we’ve been seeing for the last half-decade can be attributed to the era of the COVID pandemic. We’d hoped to see those increases level out eventually, but between the effect that the pandemic had on supply chains and more current concerns, like tariffs and the threat of inflation, costs remain high compared to historic averages. 

Even as inflation cools in some parts of the country, vehicle-related expenses haven’t really responded in kind. According to Cox Automotive, the average new-vehicle transaction price in November 2025 was $49,819, staying right in the neighborhood of September’s record-high average of just over $50,000. Because costs are so high, annual sales of new vehicles are expected to stay in the range of 15-16 million, down significantly from the pre-pandemic figure of 17 million-plus. 

How Can Your Business Control Reimbursement Costs?

There’s no use beating around the bush. These days, it’s just plain expensive to own and operate a vehicle in the U.S., and that doesn’t look like it’s going to change significantly anytime soon. This puts constant pressure on vehicle owners, as well as on the businesses that reimburse mobile employees at or near the standard mileage rate. 

As the cost of reimbursing employees increases, it’s more vital than ever to manage the mileage reimbursement process effectively. But what exactly does that look like? 

Manage Costs More Effectively

To keep your mileage reimbursement processes as cost-efficient as possible, we recommend:

• Improving mileage reporting: The best way to keep reimbursement tax-free (and to avoid the ire of the IRS) is by ensuring that employees always accurately track their mileage and record it in compliant mileage logs, showing that the mileage driven was necessary and business-related.

• Setting clear policies: Create simple, direct policies that lay out your company’s processes and procedures around mileage reimbursement, as well as what expectation employees will need to meet to stay compliant. Make sure these policies are accessible, so employees can reference them if needed.

• Implementing route optimization: While manual tracking and logging methods (such as spreadsheets and pen-and-paper logs) are allowable by the IRS, we recommend that businesses take advantage of digital tools like mileage reimbursement software for the best reimbursement processes possible. More high-tech options use tools like GPS tracking to find the best routes for employees’ business travel, reducing miles driven – and miles that need to be reimbursed. 

Find the Best Mileage Reimbursement Rate For You

While many businesses use the IRS standard mileage rate, it’s not a mandatory rate. If vehicle costs are lower in your area, you can, in most instances, choose to reimburse workers at a lower rate (as long as you don’t violate state laws, or activate the FLSA’s kickback rule). CompanyMileage offers a free rate calculator, which helps businesses find a reimbursement rate based on gas prices in their area. 

Get Reimbursement Costs Under Control With CompanyMileage

You can’t control the IRS standard mileage rate, but you can take proactive steps to optimize your business’s travel reimbursement expenses, and CompanyMileage has the tools to help you make it easy.

Our mileage reimbursement software, SureMileage, offers a novel, point-to-point method to mileage tracking. Employees enter the starting and ending points of each work-related trip into the system, which then calculates the best route between them for reimbursement. This keeps ineligible trips, duplicate reports, and inflated mileage counts from ending up in mileage logs. 

With our mobile app, SureMobile, employees can compile, edit and send expense reports from their smartphones, even while on the go. Those reports, once submitted, move through an automated, easily customizable approval workflow. Our software also integrates with all major accounting and payroll software, ensuring that once reports are approved, your hard-working employees are guaranteed fast, accurate reimbursement payments. 

CompanyMileage makes reimbursement easy and intuitive, and we can even help you save money while we do it! To learn more about how, contact CompanyMileage for a demo today.