The Internal Revenue Service (IRS) in the United States has announced a key adjustment for businesses and self-employed individuals, increasing the standard mileage rate used for calculating deductible vehicle expenses for the 2026 tax year.
Details of the Mileage Rate Increase
The new rate, which takes effect for the 2026 tax year, represents an increase of 2.5 cents per mile over the previous rate. This adjustment was confirmed in an announcement published on December 30, 2025. The standard mileage rate is a simplified method that taxpayers can use to deduct the costs of operating a vehicle for business purposes, instead of tracking and deducting actual expenses.
Implications for Canadian Businesses and Professionals
While the IRS is an American agency, this change holds significant relevance for many Canadian entities. Canadian businesses and self-employed professionals who operate vehicles in the United States for business purposes—such as cross-border transportation, sales, or consulting—can often deduct these expenses when filing U.S. tax returns. The increased rate provides a slightly higher deduction for each mile driven, potentially reducing overall U.S. tax liability for eligible claimants.
It is crucial for affected taxpayers to maintain accurate logs of business mileage, including dates, destinations, and purposes of trips, to substantiate their deductions. The rate is also frequently used by organizations to reimburse employees for the use of their personal vehicles, making it a benchmark for corporate travel policies with a U.S. component.
Broader Context and Planning
This annual adjustment by the IRS is typically influenced by factors such as the cost of vehicle operation, including fuel, maintenance, and depreciation. The 2.5-cent increase for 2026 reflects ongoing changes in these underlying costs. Tax advisors recommend that businesses and independent contractors who frequently travel to the U.S. factor this new rate into their 2026 financial planning and budgeting.
For clarity, this rate applies specifically to business use of a vehicle. The IRS sets separate standard mileage rates for medical, moving, and charitable purposes, which were not part of this particular announcement. Taxpayers should consult with a cross-border tax specialist to ensure compliance with both U.S. and Canadian tax regulations regarding vehicle expense claims.
