The IRS Makes a Mid-Year Adjustment to the Standard Mileage Rate

Last month we predicted that the IRS might announce a mid-year increase to the 2026 standard mileage rate, and that prediction has come true. On July 10, the IRS announced that, effective July 1, business mileage will be reimbursed at 76 cents per mile (up from 72.5 cents). The mileage rate for medical and moving purposes is 23.5 cents (up from 20.5), and the charitable rate will remain 14 cents per mile.

A mid-year mileage rate adjustment isn’t completely unheard of, but it’s not a routine occurrence, either. Let’s take a deeper dive into the rate increase, what caused it, and how the adjustment will impact your business.

Understanding the Standard Mileage Rate

The standard mileage rate refers to a set amount per mile that businesses use to reimburse mobile employees for their expenses when they drive their own vehicles for work. The rate, which gets updated annually by the IRS, factors in the cost of gas, maintenance, depreciation, and other costs associated with operating a vehicle. 

With a few exceptions, reimbursing employees at the standard mileage rate is technically optional. While a business can reimburse employees more per mile than the standard mileage rate, many companies opt to use the rate to determine how much they will reimburse employees who use their personal vehicles for business travel. 

Occasionally, as has happened in 2005, 2008, 2010, and 2022, the IRS announces a mid-year rate adjustment to account for global, national, and economic factors impacting the costs of owning and operating a vehicle. 

In September 2005, the rate went up 8 cents (from 40 to 48.5 cents) due primarily to the economic impact of Louisiana’s Hurricane Katrina disaster. In 2022, record-high gas prices in a market still choked by COVID-19 (and reckoning with Russia’s invasion of Ukraine) led the IRS to increase the rate from 50 to 58.5 cents. 

So what accounts for this 2026 mid-year increase of 3.5 cents? Let’s take a look.

Why Did the 2026 Rate Increase?

According to the IRS bulletin, the rate increase “results from recent increases in the cost of fuel.” It’s certainly not news that gas prices have been volatile in 2026, mostly due to global factors.

In February of this year, the U.S. and Israel launched an attack on Iran, causing the prolonged closure of the Strait of Hormuz, a critical maritime trade choke point between the Persian Gulf and the Gulf of Oman. On May 21, the national average peaked at $4.54, or $1.38 higher than in May of 2025. 

As May ended, gas prices started to dip again, but fuel costs began to climb again in the beginning of July. At the beginning of the month, the average cost of fuel in the U.S. rose 5 cents overnight, settling at $3.83 a gallon as of July 9. 

As the military conflict and tensions over controlling the Strait of Hormuz continue, the future remains uncertain. If the conflict lingers, gas prices are likely to continue climbing. 

Other Vehicle Costs 

It’s worth nothing that while fuel costs usually drive the need for a mid-year rate increase, pain at the pump isn’t the only thing the IRS considers in calculating the millage rate. 

A CompanyMileage analysis found that in analyzing vehicle ownership costs, the two biggest expenditures are fuel, which accounts for about 30% of vehicle ownership and operating costs, and depreciation, which represents about 45% of costs. Insurance accounts for 12%, licenses, registration, and taxes together make up 7%, and tires and maintenance each account for about 3% of costs.

Gas prices are demonstrably both high and volatile at the moment, but vehicle ownership costs have remained high in the U.S. since the COVID-19 pandemic. In the third quarter of 2025, AAA estimated the average annual cost of owning and operating a vehicle (calculated over 75,000 miles and 5 years) at about $11,557. That cost is down about $719 from 2024, but well above 2019’s average of about $9,300. 

The upward trajectory of the IRS standard mileage rate in the last 5 years reflects that same trend. Since 2022, the standard mileage rate has increased year after year; Compare the IRS’s 2021 standard mileage rate, 56 cents per mile, to the current (newly adjusted) rate of 76 cents. That’s a full 20-cent difference. Time will only tell if this will continue. 

How Does a Midyear Standard Mileage Rate Increase Affect You?

An increase of a few cents may feel minuscule, but those pennies add up fast over a company with multiple mobile employees who get reimbursed for their work-related mileage. For those employees, an increase of 3.5 cents can make a big difference, especially in a year marked by global uncertainty, high prices, and a high rate of inflation (which reached a three-year peak of 4.2% in May 2026).        

Accurately and effectively managing mileage reimbursement is important for business owners, as well as their mobile workforce. If you go to adjust post-July 1 reimbursements to reflect the rate adjustment but get that calculation wrong (or forget to make the change at all), you risk over- or under-paying employees. If you overpay, the IRS will only allow you to deduct up to the standard mileage rate. If you underpay, you miss out on a possible tax deduction, and you short-change your hardworking employees. 

How Do You Calculate Mileage Reimbursement After A Midyear Change?

Luckily, calculating reimbursement after a mid-year rate change is pretty straightforward. The rate you’ll use to reimburse a worker for their travel expenses depends on when they took the trip, not when you issued the reimbursement. 

For example, when calculating mileage reimbursements this year, ensure that trips made before July 1st are calculated at a rate of 72.5 cents per mile. If they are made on or after that date, you need to use the updated business rate of 76 cents. 

Whatever Comes Next, CompanyMileage has You Covered

When change comes at your business fast, it’s important to focus on the factors you can control. At CompanyMileage, we can’t control gas prices, vehicle costs, or global politics. What can do is provide businesses with the tools to quickly, accurately, and efficiently manage mileage reimbursement. 

SureMileage, our mileage reimbursement software, helps businesses and employees log, manage and calculate reimbursement without requiring piles of paper, time-consuming calculations, or costly mistakes. 

SureMileage automatically calculates the distance between the beginning and ending point of each work-related trip, instead of tracking employees’ driving and then verifying it after the fact. The method, called point-to-point calculation, prevents detours, non-work related errands, and inflated mileage estimates from showing up in expense reports and reimbursements.

When the rate of reimbursement changes (such as when the IRS announces an adjustment to the mileage rate), businesses just update the rate, which automatically gets applied to mileage calculations. And if your company decides to use a different rate than the one set by the IRS, that’s no problem. CompanyMileage even offers a free mileage rate calculator, which helps businesses calculate a rate based on fuel prices in their area, instead of national averages of vehicle costs. 

Using our SureMobile app, employees can submit trips for reimbursement within minutes. Once submitted, our software handles the approval process before a reimbursement is issued. Our systems integrate with all major and accounting systems, keeping reimbursement seamless throughout the entire process.

No matter what happens to the standard mileage rate, you and your business can stay ready with automated, intuitive expense reimbursement software that helps your company save time and money. 

To learn more about what CompanyMileage can do for your business, contact us for a demo today!