The IRS has increased the standard mileage reimbursement rate for business travel from 72.5¢ to 76¢ per mile due to rising fuel costs.
Federal Law Alert: Mileage Reimbursement Rate Increase
Although the change was announced on July 13, 2026, it is retroactively effective as of July 1, 2026. Employers should use the new rate of $0.76 per mile for all eligible business mileage incurred on or after July 1, 2026.
What Should Employers Do?
While the Fair Labor Standards Act (FLSA) does not require employers to reimburse mileage at the IRS rate, employers still need to be careful about employees’ work-related vehicle expenses.
If an employee is not reimbursed—or is reimbursed too little—those expenses could effectively reduce a nonexempt employee’s pay below minimum wage or create overtime compliance issues.
Recent court decisions have also emphasized that employers should use reimbursement methods that reasonably approximate employees’ actual vehicle expenses rather than automatically relying on a particular formula.
Next Steps
Employers that use the IRS mileage rate to reimburse employees for business driving should update their policies, payroll systems, and expense platforms to reflect the new rate.
Employers looking for assistance with employee handbook policies, such as mileage reimbursement, may want to consider reaching out to an HR outsourcing company for assistance. Most HR services include things such as employee handbook services.
To learn more about how EBC HCM can help with your mileage reimbursement policies, contact us today.
