On July 13, 2026, the Internal Revenue Service (IRS) announced a rare midyear increase to the optional standard mileage rates, which are used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Starting July 1, 2026, through December 31, 2026, the rates for business use, medical and moving purposes will increase 3.5 cents. The IRS made this change due to recent increases in fuel prices.
This means that effective July 1, 2026, the standard mileage rates for the use of a car, van, pickup or panel truck are:
- 76 cents per mile driven for business use, up 3.5 cents from the January 1, 2026, rate of 72.5 cents.
- 23.5 cents per mile driven for medical purposes, up 3.5 cents from last year.
- 23.5 cents per mile driven for moving purposes for certain active-duty members of the Armed Forces — and now certain members of the intelligence community — increased 3.5 cents from 2025.
- 14 cents per mile driven in service of charitable organizations, unchanged from last year.
These rates apply to all vehicles, including fully electric and hybrid automobiles, as well as gasoline- and diesel-powered vehicles.
The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rates for medical and moving purposes are based on variable costs only, while the charitable rate is set by statute.
Remember that California employers must fully reimburse employees for all expenses actually and necessarily incurred in the course and scope of their employment. The California Division of Labor Standards Enforcement (DLSE) has stated that using the IRS mileage rate will generally satisfy an employer’s obligation to reimburse for business-related vehicle expenses, absent evidence to the contrary. Employees, however, always have the option of calculating the actual costs of using their vehicle instead of the standard mileage rate.
Employers should update their expense reimbursement policies to reflect the new July 1 rates. Additionally, since the IRS didn’t announce the new rates until July 13, employers should review any expense reimbursements incurred during the first half of July that were paid under the prior rates to determine if any additional reimbursements are owed.
James W. Ward, J.D., Employment Law Subject Matter Expert/Legal Writer and Editor, CalChamber
CalChamber members can read more about Expense Reimbursements in the HR Library. Not a member? Learn how to power your business with a CalChamber membership.
