IRS Raised the Business Mileage Rate to 76 Cents on July 1
The IRS raised the optional standard mileage rate for business use to 76 cents per mile for July 1 through December 31, 2026, up from the 72.5 cents that applied for the first half of the year. The change stems from Announcement 2026-11, which modified the original 2026 rates set out in Notice 2026-10 following a sharp rise in fuel prices. It is the first midyear mileage change since 2022, so 2026 now has two business rates instead of one. The medical and moving rate also rose, from 20.5 cents to 23.5 cents per mile, while the charitable rate stays fixed by law at 14 cents.
Here is what the standard mileage rate is, why a midyear change matters, how to split your log, and what it means if you run a business from overseas.
What the Standard Mileage Rate Is and Why This Change Is Unusual
The standard mileage rate is an optional per-mile figure the IRS sets each year so you can deduct the cost of driving for business without adding up every gas receipt, repair bill, and depreciation entry. You multiply your business miles by the rate and deduct the result. The IRS sets separate, lower rates for medical travel and moving, though the moving rate applies only to active-duty members of the Armed Forces and certain members of the intelligence community.
In most years, the rate is set once in late December and remains in effect for all 12 months. A midyear change is rare, and the last one was in 2022, when fuel prices spiked. When it happens, a single calendar year ends up with two rates, and you have to track which miles fall in which period.
This matters to anyone who deducts business driving on a U.S. return: self-employed people, freelancers, gig workers, and small business owners who use the mileage method instead of tracking actual vehicle costs. For Americans running a business from abroad, it carries an extra layer, because the same deduction also lowers the income on which your self-employment tax is based. More on that below.
The 2026 Mileage Rate Now Comes in Two Halves
Because the change took effect midyear, the rate you use depends on when you drove the miles. Miles driven January 1 through June 30 use the original rate; miles driven July 1 through December 31 use the higher one.
| Purpose | Jan 1 to Jun 30, 2026 | Jul 1 to Dec 31, 2026 |
|---|---|---|
| Business use | 72.5 cents | 76 cents |
| Medical, and moving for active-duty military | 20.5 cents | 23.5 cents |
| Charitable use | 14 cents | 14 cents |
The business rate is the one that matters for most filers. The moving rate applies only to active-duty members of the Armed Forces and certain members of the intelligence community relocating on orders. The charitable rate is set by statute, so it did not move.
Your 2026 Mileage Log Has to Split at July 1
If you use the standard mileage method, you can no longer multiply your full-year business miles by a single number. You apply 72.5 cents to miles driven through June 30 and 76 cents to miles driven from July 1 onward.
Say a freelance consultant drives 9,000 business miles in 2026: 5,000 in the first half of the year and 4,000 in the second half.
- First half: 5,000 miles times 72.5 cents equals $3,625
- Second half: 4,000 miles times 76 cents equals $3,040
- Total deduction: $6,665
Applying the old 72.5-cent rate to all 9,000 miles would have produced $6,525, so the midyear bump is worth an extra $140 here. The gap grows the more you drive after July 1. The key is a mileage log that records the date of each trip, not just the total, so you can sort your miles into the correct half of the year.
What This Means for Americans Abroad
If you are self-employed abroad, the mileage deduction lowers more than your income tax. Because it is a deductible business expense on Schedule C, it reduces your net profit, and net profit is the figure your self-employment tax is calculated on. The same miles can cut two taxes at once.
That last point is where the expat angle lives. The Foreign Earned Income Exclusion can erase your U.S. income tax on foreign earnings, but it does not touch self-employment tax, which runs at 15.3%. So even if the FEIE already brings your income tax to $0, every business mile you deduct still shrinks the profit that the 15.3% is charged on, unless a totalization agreement exempts you from U.S. self-employment tax. If you claim the Foreign Tax Credit instead, the deduction lowers your taxable income directly.
Who This Affects Most
This is worth a closer look if you are:
- A self-employed expat or freelancer who drives for client work and files a Schedule C from abroad.
- A digital nomad running a location-independent business and logging business miles across more than one country.
- A small-business owner overseas who uses the standard mileage rate rather than tracking actual vehicle costs.
- An overseas contractor whose travel between job sites is an ordinary and necessary business expense.
Steps to Take Now
- Split your 2026 mileage log on July 1. Total your business miles for January through June separately from July through December.
- Apply 76 cents only to miles driven on or after July 1. Miles before that date stay at 72.5 cents.
- Record the date of every business trip, not just the mileage. A dated log is what lets you defend the split if the IRS asks.
- Decide whether to use the standard mileage rate or actual expenses before you file. The higher rate may not beat your real fuel and maintenance costs, and there are rules on when you can switch, so check both.
- Coordinate the deduction with your FEIE or Foreign Tax Credit. How much it saves you depends on which one you use and whether you owe U.S. self-employment tax.
If you are unsure how the deduction interacts with your exclusion, your credit, or your self-employment tax, our team helps self-employed Americans abroad get the business side of their return right.
Frequently Asked Questions
No. The 76-cent rate applies only to business miles driven on or after July 1, 2026. Miles driven from January 1 through June 30 stay at 72.5 cents. You total the two halves separately and add them together on your Schedule C.
Yes. You can deduct your actual costs, such as fuel, maintenance, insurance, and depreciation, instead of the standard rate. To keep the option open, you generally have to use the standard mileage method in the first year the car is available for business, and a leased vehicle must stay on one method for the full lease. Compare both against your business deductions before you file.
Reconstruct your log as closely as you can from calendars, invoices, and map history, since a dated record is what supports splitting your miles at July 1. Going forward, log the date, purpose, and distance of every business trip so the two rate periods stay clean.
The Bottom Line
A midyear rate change is small on paper, but it quietly turns your 2026 mileage log into two logs. Record the date of each business trip, apply 76 cents to your second-half miles, and the higher rate works in your favor rather than becoming a filing headache.
Mileage Rules Changed Midyear. We Track It for You.
The information in this article is for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are complex and change frequently. Consult a qualified tax professional regarding your specific situation before taking any action.
