The IRS standard mileage rate, also known as federal gas mileage reimbursement, is a guideline that can be used by employers, employees, and independent contractors. Regardless of who’s making calculations with this rate, it applies to the use of personal vehicles for job-related responsibilities. Employers can use it to simplify the process of reimbursing workers; employees can use it to claim a tax deduction on un-reimbursed miles; and independent contractors can use it as a point of reference when they’re calculating trip charges.
The IRS has set the 2026 standard mileage rate for business use at 72.5 cents per mile. This rate is meant to cover more than just gas – it also goes towards things like depreciation, maintenance, insurance, etc. The federal gas mileage reimbursement rate has been in place since 1980, originally at 22 cents per mile. Since then, it’s been updated periodically to account for factors like inflation and changing oil prices.
Although the most common application of this rate is for business use of personal vehicles, there are a few other types of personal vehicle use that can be reimbursed according to their own IRS mileage rates. Independent contractors often use the federal gas mileage reimbursement rate when estimating trip charges, since it’s calculated to cover a broad variety of costs associated with using a vehicle. Using the IRS mileage rate is optional for employers and independent contractors, but if employees want to deduct un-reimbursed mileage from their taxable income, they should use the most recently published rate to calculate the deduction.
Here are the rates for 2026:
Here are the rates for 2025:
As you may have noticed, adjustments to IRS mileage rates don’t always mean increases. Even though the 2026 business use rate increased, both the medical and moving rates decreased by 0.5 cents/mile. Since the IRS takes a variety of fixed and variable costs into account each time they set a new mileage rate, sometimes you’ll see lower rates than previously.
The IRS standard mileage rate can be used by anyone who wants to reimburse or deduct the costs of driving a personal vehicle for business purposes. Most people fall into one of three categories: employers, employees, or independent contractors.
Employers can use the federal gas mileage reimbursement rate, or they could use a different rate or reimbursement method. The main exceptions are employers in California, Massachusetts, and Illinois, where there are state mileage reimbursement requirements. There’s no Georgia mileage rate, since it’s one of the 47 states that uses IRS mileage rates by default.
Employees can either be reimbursed using the standard mileage rate (at their employers’ discretion), or they can claim the un-reimbursed expense as a deduction on their yearly tax returns. In either case, they would need to keep adequate logs of their driving activity for business use, including odometer readings, dates, reasons for each trip, and so on.
Independent contractors who use the federal gas mileage reimbursement rate can refer to it when calculating trip charges, as well as use it to claim a deduction on their quarterly taxes. Just like with employees, independent contractors would need to maintain logs of each trip in order to claim this deduction as a business expense.
Some employers pay more than the standard mileage rate; in that case, the portion of the reimbursement that goes over the IRS rate gets taxed as income. Other employers pay less than the IRS mileage rate, which translates to less money spent on reimbursing employees. However, it could also make the company a less appealing place to work, resulting in higher turnover rates or challenges in retaining talent.
Some employers decide to reimburse employees for actual expenses, rather than the estimate that the IRS provides. This approach is more accurate, but it also requires more effort. For example, the rate of reimbursement would have to be readjusted every time gas prices changed – which is all the time. Employees would also have to keep more detailed records, especially if they split their time between various regions where prices differed.
If you’re an employer considering the pros and cons of federal gas mileage reimbursement, it’s important to know how it could impact your taxes. The good news is, this is typically deductible as a business expense, so unless you were paying more than the IRS mileage rate, you likely wouldn’t be required to pay federal taxes on it.
Navigating federal gas mileage reimbursement isn’t that complicated compared to many other payroll topics, but it should still be approached with compliance in mind. Depending on the way it’s handled, it can have a number of positive or negative effects on your business. As with almost any IRS publication, it takes time to fully understand the topic; that’s why we make sure our team is ready to walk you through every step. If you want to put your company’s compliance in expert hands, get in touch to see what we can do for your business.