Takeaways

• Effective 07.01.26, the IRS optional standard mileage rate for business use increased to 76 cents per mile.
• The FLSA does not mandate mileage reimbursement at the IRS rate, but unreimbursed or under-reimbursed vehicle expenses may create minimum wage or overtime exposure if they reduce nonexempt employees’ wages below required levels. State expense-reimbursement laws may impose broader obligations.
• This midyear rate adjustment serves as a reminder for employers to ensure their reimbursement practices account for employees’ work-related vehicle costs.

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Article

The Internal Revenue Service (IRS) has raised the optional standard mileage rate for business use of an automobile for the second half of 2026. Effective July 1, 2026, the business mileage rate increased from 72.5 cents per mile to 76 cents per mile. Employers that utilize the IRS rate for employees’ mileage reimbursement should adjust their reimbursement policies to track the IRS rate.

Federal Wage and Hour Considerations

The Fair Labor Standards Act (FLSA) does not require use of the IRS rate for reimbursement of mileage costs. Unreimbursed or under-reimbursed business expenses, however, can create minimum wage and overtime liability if those expenses effectively reduce a nonexempt employee’s wages below the required minimum wage.

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