IRS Raises Business Mileage Rate Mid-Year
By: Kathryn O’Connor, PHR, SHRM-CP, CCP, GRP, Director of Total Rewards and People Analytics
Published July 21, 2026
Effective July 1, 2026, the Internal Revenue Service (IRS) increased the standard business mileage rate to 76 cents per mile, up from 72.5 cents per mile earlier this year.
Mid-year adjustments to the standard mileage rate are uncommon. The IRS typically sets rates once annually before the start of the tax year. This is only the second mid-year adjustment in recent years; the last occurred in 2022 following a sharp spike in gas prices. The IRS cited rising fuel costs as the reason for this year's increase.
The revised rate applies to mileage allowances paid to an employee on or after July 1, 2026, for transportation expenses incurred on or after that date. Mileage incurred before July 1 should still be reimbursed at the original 72.5-cent rate, even if the reimbursement itself is processed later. As in prior years, the rate applies equally to gasoline, diesel, hybrid, and electric vehicles.
Employers have the option of using the IRS standard mileage rate to reimburse employees who use their personal vehicles at the employer's direction, or they may set their own reimbursement rate. Mileage reimbursement is a separate expense from compensation for travel time, and organizations should treat the two independently in their policies and payroll practices.
Illinois employers should also remember that the Illinois Wage Payment and Collection Act requires reimbursement for all necessary expenses employees incur within the scope of their employment and directly related to services performed for the employer. A clear business expense reimbursement policy should explain when mileage qualifies for reimbursement and outline the process for tracking, submitting, and approving expenses.
HR Source members can review our Mileage Reimbursement FAQ for guidance on when and how to reimburse employee mileage, or contact us through the HR Hotline Online or at 800-448-4584.