MW Who qualifies for the bigger IRS tax break on gas - and how to get the most of it

Andrew Keshner

Gas prices could return to $4 soon, some fuel-industry experts say

The last time the IRS took a step like this, gas prices were spiking from Russia's invasion of Ukraine.

The IRS is going to let certain drivers write off even more of their fuel expenses as gas prices rise again.

The Internal Revenue Service had already established how much businesses and self-employed taxpayers could deduct on their 2026 driving costs. But the agency recently updated those rates so that eligible drivers could deduct more money for every mile.

From July to December, the mileage rate for businesses is 76 cents per mile. That's an almost 5% increase from the rate in effect for the first half of the year, 72.5 cents per mile.

The change is a result of "recent increases in the price of fuel," according to an IRS bulletin published July 9.

A cease-fire deal between the U.S and Iran has come undone for now. As hostilities flare, prices for oil and gas have increased. U.S. gas prices could hit the psychologically significant $4-per-gallon mark in a matter of days, some fuel-industry experts say.

On Wednesday, drivers were paying $3.89 per gallon, according to AAA's national average. That's 10 cents more than a week ago, but lower than $4.06 a month ago.

The IRS typically sets its mileage rate once a year, but midyear rate hikes have happened before.

For example, the IRS upgraded its formula in the middle of 2022, when gas prices spiked during the early stages of the Russia-Ukraine conflict.

The mileage rate is meant to defray the wear and tear of driving costs, and not just fuel expenses.

The tax break isn't for all drivers. When it comes to individual income taxes, the mileage deduction is open to sole proprietors who file a Schedule C to report their business income or losses, said Mark Luscombe, principal analyst at Wolters Kluwer Tax & Accounting.

That could include independent contractors and gig workers driving for rideshare platforms like Uber $(UBER)$ and Lyft $(LYFT)$, he said. The mileage deduction is also for self-employed taxpayers and business owners. But it's not for employees who are working for someone else.

Even when taxpayers are eligible, the IRS says the reimbursement rate doesn't apply to the miles they drive commuting to and from their office. Rather, it's for the miles traveled once they start their work day.

The tax savings can be valuable as long as drivers count their miles. Drivers can manually count their miles with each trip, or they can turn to an array of apps that track miles for tax purposes.

According to Luscombe, 100 miles driven in the first half of the year would result in a deduction that lowered a person's taxable income by $72.50. In the second half of the year, under the updated mileage rules, driving another 100 miles would result in a $76 deduction, he noted.

Some people may drive much more, meaning they can reap much larger deductions. Mark Gallegos, a tax partner at Porte Brown, has a client who drives at least 10,000 miles a year for work - which would mean a four-figure deduction at tax time.

"When you talk about people who drive hundreds of miles, or thousands of miles, it matters," Gallegos said.

-Andrew Keshner

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July 15, 2026 17:22 ET (21:22 GMT)

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