The cents-per-mile valuation rule explained.

The rule

Publication 15-B (2026) states the rule plainly: you determine the value of a vehicle you provide to an employee for personal use by multiplying the standard mileage rate by the total miles the employee drives the vehicle for personal purposes. Personal use is any use other than use in your trade or business. The amount must be included in the employee’s wages or reimbursed by the employee. The publication does not print the 2026 rate in its text; it says to go to IRS.gov/Pub15B, noting in its What’s New section that the 2026 business mileage rate had not yet been published when the publication was released.

The rate: what the IRS publishes

The IRS standard mileage rates page (page last reviewed July 28, 2026, read November 2, 2026) lists business use at 72.5 cents a mile for January 1 to June 30, 2026 and 76 cents a mile for July 1 to December 31, 2026, citing IR-2025-128 and IR-2026-29 respectively. Publication 15-B does not say which of those two rates applies to a particular valuation date, and this page does not decide that for you. Check the IRS rate page and the publication’s page on IRS.gov for the rate in effect and for any guidance on mid-year changes before running payroll. The site’s IRS mileage rate history and mileage deduction calculator show past rates for reference.

When you may use the cents-per-mile rule

The rule is available if either requirement is met.

1. Regular use in your trade or business. Decided on all the facts and circumstances. The publication gives two safe harbors: at least 50% of the vehicle’s total annual mileage is for your trade or business, or you sponsor a commuting pool that generally uses the vehicle each workday to drive at least three employees to and from work. Infrequent business use, such as occasional trips to the airport or between multiple business premises, is not regular use.
2. The mileage test. The vehicle is actually driven at least 10,000 miles during the year (reduced proportionately if you own or lease it for only part of the year) and is used during the year primarily by employees, which includes consistent use for commuting.

The publication’s illustration of the mileage test: if only one employee uses a vehicle during the calendar year and drives it at least 10,000 miles, the vehicle meets the test even if every mile is personal.

When you may not

You cannot use the rule for an automobile (including a truck or van) if its value when you first make it available to any employee for personal use is more than the maximum automobile value. The publication directs readers to IRS.gov/P15B for the maximum automobile value for 2026 and does not restate the figure in its text; it also refers to Treasury Decision 9893 for the effect of P.L. 115-97 on this rule. If you and the employee own or lease the automobile together, see Regulations section 1.61-21(e)(1)(iii)(B) and (C). For this rule a vehicle is any motorized wheeled vehicle, including an automobile, manufactured primarily for use on public streets, roads and highways.

What the rate includes

The cents-per-mile rate includes the value of maintenance and insurance for the vehicle, and you should not reduce the rate by the value of a service included in the rate that you did not provide. For miles driven in the United States, its territories, Canada and Mexico, the rate includes the value of fuel you provide. If you do not provide fuel, you can reduce the rate by no more than 5.5 cents. The value of any other service you provide for the vehicle is not included in the rate; use the general valuation rule for those.

Consistency requirements

Once you pick the rule, you are held to it. You must begin using it on the first day you make the vehicle available to any employee for personal use, with the exception that if you start with the commuting rule you can change to cents-per-mile on the first day you stop using the commuting rule. You must use it for all later years the vehicle is available and qualifies, except that you may use the commuting rule for a year in which the vehicle qualifies under it. If the vehicle stops qualifying in a later year, you can use any other rule it then qualifies for from that year on. And you must keep using it if you provide a replacement vehicle that qualifies and your primary reason for the replacement is to reduce federal taxes.

Worked illustration

This illustration applies the publication’s method with an assumed rate and is not an IRS example. Assume a company sedan is used 18,000 miles in a year, of which 4,000 are personal, and the employer provides fuel. At an assumed 70 cents a mile, the personal-use value is 4,000 x $0.70 = $2,800, included in the employee’s wages in boxes 1, 3 and 5 unless the employee reimburses it. If the employer did not supply fuel, the rate could be reduced by no more than 5.5 cents, to 64.5 cents, giving $2,580. In real payroll use the rate the IRS publishes for the period, not the assumed figure.

Note also that the publication warns not to determine the fair market value of an employer-provided vehicle by multiplying a cents-per-mile rate by the miles driven unless the employee can prove the vehicle could have been leased on a cents-per-mile basis. The cents-per-mile rule is a special valuation rule, not the general one.

Other valuation rules and reporting

The publication describes two further special rules: the commuting rule, which values each one-way commute at $1.50 (per employee, if several commute in the vehicle) and requires a written policy barring personal use other than commuting and de minimis use, and the lease value rule, based on the automobile’s annual lease value. The commuting rule cannot be used for a control employee when the vehicle is an automobile. For 2026 a control employee of a nongovernment employer is generally an officer whose pay is $145,000 or more, a director, an employee whose pay is $290,000 or more, or an employee who owns a 1% or greater interest, or you may choose the highly compensated employee definition instead.

Report the value in boxes 1, 3 and 5 of Form W-2 (and optionally box 14). You must determine the actual value by January 31 of the following year. Where you elect not to withhold income tax on the vehicle value, the publication requires written notice to the employee by January 31 of the election year or within 30 days after the vehicle is first provided, whichever is later.

Pub 15-B fringe benefits at a glance

Other pages in this set

De Minimis Benefits, Achievement Awards, Educational Assistance ($5,250), Dependent Care Assistance, Adoption Assistance, Meals on Business Premises, No-Additional-Cost Services, Cafeteria Plan, Working Condition Fringe, Lodging on Business Premises.

Sources

• IRS Publication 15-B (2026), Employer’s Tax Guide to Fringe Benefits: section 2, Cents-per-Mile Rule (section 3); Table 2-1; section 4 reporting. Page last reviewed April 30, 2026. Read November 2, 2026.
• IRS standard mileage rates: 2026 business rates of 72.5 cents (Jan. 1 to June 30) and 76 cents (July 1 to Dec. 31). Page last reviewed July 28, 2026. Read November 2, 2026.

Every dollar figure on this page is a 2026 figure from the publication unless a different year is stated. The IRS can change a publication at any time, and the publication, your plan documents and a payroll professional control over this page. This page restates the publication and does not extend it to facts it does not address.