by The U.S. Tax Service Increased the Business Travel Compensation Rate
The U.S. Internal Revenue Service announced an increase in the standard mileage reimbursement rate for business travel by car. Starting in 2026, each mile driven for business purposes will be compensated at a rate of 72.5 cents. This is 2.5 cents more than the previous year. This change applies to all drivers regardless of the type of car—hybrid, electric, diesel, or conventional gasoline engine.
While for many this increase may mean only a few hundred dollars extra when filing a tax return, it could become an additional argument for upgrading a car to a more powerful model. The rate has been consistently rising in recent years:
Historical Context and Comparison with Other Countries
The standard mileage rate system was introduced in the early 1970s to simplify tax deductions for business use of a car. In 1971, the rate was only 10 cents per mile. However, adjusted for inflation, this amount is equivalent to approximately $1.05 per mile in 2026 dollars, which is significantly higher than the current figure.
Forbes reports that, despite the nominal growth, in real terms drivers today receive less than half a century ago.
For comparison, in the United Kingdom, compensation for business trips is significantly lower. British businesses and self-employed drivers typically receive 45 pence per mile for the first 10,000 business miles and only 25 pence per mile for the remaining mileage. This converts to approximately 61 and 34 US cents respectively, despite fuel in the UK costing significantly more than in the US.
Other Trip Categories and Alternatives
Not all trips are compensated at the new increased rate. For example, the rate for trips for medical reasons in 2026 will slightly decrease to 20.5 cents per mile. The same rate applies to the relocation of military personnel on active duty. Both rates are 0.5 cents lower than in 2025.
For drivers who perform trips for charitable organizations, the rate remains unchanged from 2025 and is only 14 cents per mile. This rate is lower because it does not account for car depreciation, insurance, and repair costs.
According to Forbes, this rate for charitable trips has not changed since the presidency of Bill Clinton.
Drivers who consider the official rates insufficient have the right to calculate the actual costs of operating their car. However, this option is only available starting from the second year of using this car for business trips. If the car is leased, the driver is required to use the official IRS rate.
The rate increase is certainly a positive step for millions of Americans whose work involves travel. However, as analysis shows, the rise in the cost of living and inflation over recent decades has significantly outpaced the nominal increase in compensation. This creates a debate about whether the official rates reflect the true costs of car ownership today, especially against the backdrop of much higher historical figures in real terms. The situation also points to differences in compensation approaches between countries and different trip categories, where some areas, such as charity, are clearly lagging behind.
