If your business reimburses employees for work-related driving or tracks vehicle mileage for business purposes, there’s an important IRS update to be aware of for the second half of 2026.

The IRS has announced an increase to the standard business mileage rate to 76 cents per mile, effective for eligible transportation expenses paid or incurred beginning July 1, 2026.

The midyear adjustment comes in response to recent increases in fuel prices. However, the updated mileage rate applies to qualifying business mileage regardless of the type of vehicle being driven, including gasoline, diesel, electric, and hybrid-electric vehicles.

What Does the New Mileage Rate Mean for Businesses?

Beginning July 1, 2026, businesses using the IRS standard mileage rate should account for the new 76-cent-per-mile rate when calculating eligible business mileage.

Because this change takes effect in the middle of the calendar year, employers and employees should pay particular attention to when business mileage occurred. Mileage driven before July 1 may be subject to the rate in effect during the first half of 2026, while qualifying mileage beginning July 1 should be calculated using the new rate.

Businesses may want to review their:

• Employee mileage reimbursement policies
• Expense reporting procedures
• Payroll and accounting processes
• Mileage tracking systems and apps
• Internal reimbursement forms and documentation

Clear recordkeeping is especially important when mileage rates change midyear.

Does the Rate Apply to Electric and Hybrid Vehicles?

Yes. The IRS standard business mileage rate applies to eligible business use of electric and hybrid-electric vehicles, as well as gasoline- and diesel-powered vehicles.

This means businesses should not apply a different standard mileage rate simply because an employee uses an electric or hybrid vehicle for qualifying business travel.

Why Staying Current Matters

Mileage reimbursements may seem like a small part of running a business, but changes like these can create confusion if payroll, accounting, and employee expense policies aren’t updated promptly.

Employers should make sure the people responsible for processing reimbursements are aware of the July 1 effective date and that employees understand how to accurately document their business mileage.

Keeping accurate records and staying informed about IRS changes can help businesses maintain consistent processes and avoid unnecessary administrative headaches.

Let Priority One Payroll Help Keep Your Business on Track

Running a business means keeping up with a lot—and payroll-related rules, reporting requirements, and administrative changes are just part of the picture.

At Priority One Payroll, we work with businesses to simplify payroll processing and provide the personalized, responsive service business owners deserve. When you have questions, you shouldn’t have to navigate a maze of automated systems or wonder who to call.

Looking for a payroll partner who puts your business first? Contact Priority One Payroll today to learn more about our payroll services and how we can help make managing your workforce a little easier.

This article is provided for general informational purposes only and should not be considered tax, accounting, or legal advice. Businesses should consult with a qualified tax or accounting professional regarding how IRS mileage rules apply to their specific circumstances.