High Gas Prices Have Silver Lining: Increased Deductions

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Gas Prices Drive Up IRS Standard Mileage Amount

The IRS has announced a mid-year increase in the standard mileage rate for calculating the deductible costs of operating an automobile for business, medical or moving. “This modification results from recent increases in the price of fuel,” the IRS explained. The revised standard mileage rates for July 1 through the end of 2026 are:

Business: 76 cents per mile
Medical and moving: 23.5 cents per mile
Charitable miles: 14 cents per mile.

For the first six months of this year, the rate was 72.5 cents for business miles and 20.5 cents for medical and moving miles. The charitable mileage rate is set by Congress and remains unchanged, at 14 cents per mile, as it has been since 1998.

For taxpayers, this means that the yearly mileage amount must be allocated to the first and last half of the year, and then the different mileage rates must be applied to each period, January-June and July-December. This requirement makes documenting business mileage all the more important.

Gas Prices

The IRS has adjusted the standard mileage rate in the middle of the year five times in the last 20 years, in 2005, 2008, 2011, 2022 and now in 2026. The American Automobile Association tracks gas prices and shows that, as of mid-August 2026, the average U.S. price was $4.06 per gallon for Regular gas.

The U.S. Energy Information Administration shows the progression of gas price increases through 2026:

Year	Jan	Feb	Mar	Apr	May	Jun	Jul
2026	2.936	3.039	3.771	4.236	4.609	4.184	4.064

Takeaways

Given the complication of having to apply two different mileage rates within one tax year, taxpayers claiming mileage and employers reimbursing mileage should make sure that a contemporaneous, dated mileage log reflects business, medical or moving usage of a vehicle. Each log entry should document:

Date of the trip
Starting point and destination
Business or other qualifying purpose of the trip
Number of miles driven

Note that many GPS-based mileage trackers are available to do the work for you, some bundled with bookkeeping software. Businesses should take advantage of recordkeeping programs, and your Frazier & Deeter tax advisor may be able to make recommendations. The key here is, the taxpayer has the burden of proof to establish the right to a deduction. The IRS does not have to disprove your numbers.