NEWS | Federal Fuel and Mileage Tax Updates Small Businesses Should Know for 2026

There's a 2.5 cent difference as we say 'goodbye' to 2025, and, with the 2026 tax filing season speeding down the road ahead, small businesses should take note of key federal tax provisions affecting fuel use, mileage, and vehicle costs.

JAN. 05, 2026 | While there’s no new federal “gas tax” overhaul this year, there are important IRS updates and longstanding federal credits and deductions that can help small businesses manage fuel-related costs and maximize tax savings.

A quick note - all small-business owners and taxpayers should consult their tax advisors for specific guidance related to tax changes. NSBA is continuing to monitor federal policy changes from Capitol Hill and Washington, advocating for common sense small-business policies on the tax front.

For starters, the Internal Revenue Service (IRS) has increased the standard mileage rate for business use of a vehicle to 72.5 cents per mile for 2026, up from 70 cents in 2025. The standard mileage rate is intended to account for fuel costs, maintenance, depreciation, insurance, and other vehicle-related expenses.

Small businesses and self-employed individuals may use the standard mileage rate to calculate their federal deduction for business travel instead of tracking and deducting actual vehicle expenses. The rate applies to cars, vans, pickups, and panel trucks used for business purposes, regardless of fuel type.

The increase provides a larger federal deduction for businesses that rely heavily on vehicle travel, including contractors, sales professionals, and service-based small businesses.

Federal tax law continues to allow businesses to choose between the standard mileage method and the actual expense method for deducting vehicle costs. Under the actual expense method, businesses deduct the business portion of fuel, repairs, insurance, depreciation, and other operating costs.

Once a method is selected for a vehicle in a given year, businesses must follow IRS rules governing consistency and record-keeping. In all cases, only the business use portion of a vehicle qualifies for a federal deduction; commuting miles remain non-deductible.

Certain small businesses may continue to qualify for the federal fuel tax credit, which allows taxpayers to recover federal excise taxes paid on fuel used for nontaxable, off-highway business purposes.

Businesses claiming the credit must file the specific tax form(s) for Credit for Federal Tax Paid on Fuels, and maintain documentation showing the type of fuel used, gallons consumed, and qualifying business purpose.

The IRS continues to emphasize documentation for all vehicle- and fuel-related deductions and credits. For instance, small businesses claiming mileage deductions must maintain mileage logs, while fuel tax credit claims require detailed fuel usage records.

Tax professionals caution that improper or unsupported fuel tax credit claims may lead to penalties or audits.

Although federal gas tax rates themselves remain unchanged in 2026, updates to mileage deductions and continued fuel tax credit availability make vehicle-related tax planning an important issue for small businesses this year.

Small-business owners are encouraged to review their vehicle use, maintain accurate records, and consult with a tax professional to ensure compliance with federal tax rules while maximizing available deductions and credits.