Monthly Tax Update
This month, I will bring some updates. The IRS announced on July 13th, 2026, the optional standard mileage rates for substantiating the costs of operating an automobile for business, medical or moving purposes. The IRS made the change in 2026 to reflect rising fuel costs. These revised rates are effective beginning July 1st, 2026.
For tax year 2026, we will have two mileage rates: the first from January 1st, 2025, through June 30th, 2026, and the second from July 1st, 2026, through December 31st, 2026. This Announcement modifies previous rates. Here are the guidelines: For the period January 1st, 2025, through June 30th, 2026, the standard mileage rate is 72.5 cents per mile for all business miles. For the period July 1st, 2026, through December 31st, 2026, the standard business mileage rate is increased to 76 cents per mile.
The mileage rate for moving and medical expenses also increased from 20.5 cents per mile to 23.5 cents per mile. The charitable mileage rate is fixed by statute at 14 cents per mile and has not changed. Nevertheless, these rates apply to fully-electric, hybrid-gasoline and diesel-powered vehicles.
It is important to remember that moving expenses are limited exclusively to active-duty members of the Armed Forces. General civilians cannot deduct moving expenses. Moreover, when a company relocates employees to another city or state, the reimbursement or paid amount for their moving expenses will be treated as taxable income and is subject to tax withholding on their W-2s. Employers should update the proper mileage rate they will pay for the period at issue.
Next, the IRS announced a new automatic process to provide penalty relief for taxpayers with a history of filing and paying on time, reducing the need for them to request assistance. The new Automatic Exemption from Penalty (AEP) will be transitioning to replace the First Time Abate during this summer, and will be applied to original tax returns beginning with tax year 2025 and 2026 quarterly returns, as well as future tax periods. Taxpayers qualify if they have a history of timely filing the return and paying any tax due in the three prior years. When taxpayers qualify, penalties are not assessed during processing for failure to file, failure to pay and failure to deposit. While AEP prevents the assessment of certain penalties, taxpayers must still pay any tax and interest due, as well as any penalties not eligible for relief. Lastly, if you don’t qualify for AEP, you may still request penalty relief based on reasonable cause.
More good tax stuff next month. Remember, this is a very brief overview. It is your responsibility to discuss any tax and financial changes with your professional advisor for assistance in evaluating your situation.
For details and specific assistance in applying the general information in this article, call us at your earliest convenience or contact your tax advisor. Provided by Pedro L. Baldeon, E.A., 321-632-5726, a member of the National Society of Tax Professionals.
