The 2026 Mileage Rate Split at $0.725 and $0.76 — Your Car's Depreciation Component Didn't

Published: October 2, 2026 · Reading time: 10 min

TL;DR: The 2026 standard mileage rate changed mid-year — $0.725/mile through June 30 (Notice 2026-10), $0.76/mile from July 1 (Announcement 2026-11). That revision touched the business, medical, and moving rates. It did not touch the separate depreciation component — the per-mile figure that reduces your car's tax basis — which Notice 2026-10's Section 4 set at a flat $0.35/mile for all of 2026, and which Announcement 2026-11 left alone by saying outright: "all other provisions of Notice 2026-10 remain in effect." In the worked example below, a freelance photographer who drove 5,400 business miles before July 1 and 6,600 after reduces her $34,000 car's basis by exactly $4,200.00 for the year — regardless of which half those miles fell in. Treat the component as if it scaled up with the deduction rate the way a reasonable guess might suggest, and you'd overstate the basis reduction by $111.52 — which later overstates a sale-year taxable gain by the identical $111.52. Because she drove the car for personal use too (60% business, 40% personal), her year-end sale gain and loss also have to be figured separately for each part under IRS Pub. 544: the business-use share is a $2,400.00 Section 1245 ordinary gain, and the personal-use share's $1,200.00 loss is nondeductible — not something you net against the gain to arrive at a smaller number.

Every mileage guide this site has published for 2026 — including its own — has led with the same headline: the deduction rate split in half at July 1. That's true, and it's the number that shows up on Schedule C. It's also not the only rate buried inside "the standard mileage rate." A second, separate per-mile figure — the depreciation component — governs how much of your vehicle's basis disappears with every business mile, and it runs on a different clock than the deduction rate does.

Two Different Numbers, One Notice

Notice 2026-10 is the IRS's annual mileage guidance for 2026, and it does two separate jobs in two separate sections.

Section 3 sets the rates you actually deduct:

"The standard mileage rate for transportation or travel expenses for 2026 is 72.5 cents per mile for all miles of business use."

Section 4, titled "Basis Reduction Amount," sets something else entirely:

"For automobiles a taxpayer uses for business purposes, the portion of the business standard mileage rate treated as depreciation is 26 cents per mile for 2022, 28 cents per mile for 2023, 30 cents per mile for 2024, 33 cents per mile for 2025, and 35 cents per mile for 2026."

These are not the same figure, and they don't move together by assumption. One is what you deduct. The other is what the IRS treats as if you'd separately depreciated the car — the number that quietly reduces your basis every year you use the standard rate, as this site's existing coverage of the depreciation component already explains for the general mechanic. That earlier post, written in June 2026, could only say the 2026 figure "comes from the IRS's annual mileage notice" — Notice 2026-10 answers that: $0.35 per mile, and it cross-checks exactly against IRS Publication 463's own historical table of 28¢ (2023), 30¢ (2024), and 33¢ (2025).

Then the Rate Split. The Component Didn't.

On July 1, 2026, Announcement 2026-11 revised the business and medical/moving rates Notice 2026-10 had set in January, citing fuel-price increases:

"This announcement informs taxpayers that the Internal Revenue Service is modifying Notice 2026-10, 2026-4 I.R.B. 378, by revising the optional standard mileage rates for computing the deductible costs of operating an automobile for business, medical, or moving expense purposes... The revised standard mileage rates are: (1) Business 76 cents per mile (2) Medical and moving 23.5 cents per mile."

That's the entire content of the revision — two numbers, business and medical/moving, effective for expenses paid or incurred on or after July 1, 2026. The charitable rate, fixed by statute at 14 cents per mile under §170(i), was never in play. And immediately after setting those two revised numbers, Announcement 2026-11 says what it did not touch:

"All other provisions of Notice 2026-10 remain in effect."

Section 4 — the 35-cents-per-mile basis reduction figure — is one of those other provisions. Nothing in Announcement 2026-11 mentions depreciation, basis, or Section 4 at all. The depreciation component for 2026 is $0.35 per mile, for the entire calendar year, exactly as Notice 2026-10 originally set it in January, unaffected by the rate change that took effect in July.

Three of the four rows changed at the July 1 boundary. The depreciation component is the one row that didn't — and it's the row almost nobody checks, because it never appears on the face of Schedule C.

Why the Component Can't Just Be Assumed to Track the Rate

It's a reasonable-sounding guess: the deduction rate rose, so maybe the piece of it attributed to depreciation rose by the same proportion. It's also not how either document is written. Rev. Proc. 2019-46, Section 4.04 — the regulatory basis for the depreciation component in the first place — ties the basis-reduction figure to "a per-mile amount (published by the IRS in an annual notice)," and that annual notice is Notice 2026-10's Section 4, stated once, for the full year, with no sub-period breakdown. Announcement 2026-11 amended Section 3's rate tables and nothing else. There is no published $0.35-to-something-higher revision to point to, because none was issued.

Worked Example: One Car, Two Rate Periods, and a Year-End Sale

Facts. Priya is a single freelance commercial photographer. On January 2, 2026, she places a $34,000 car in service and elects the standard mileage rate — the required election in the car's first year of business use. She drives it for both business and personal use all year and keeps a contemporaneous mileage log. She drives 5,400 business miles from January through June and 6,600 business miles from July through December — 12,000 business miles total against 20,000 total miles driven, a 60% business-use rate. On December 31, 2026, she trades the car in toward a new one, with a $31,000 trade-in allowance. (A vehicle trade-in is a taxable disposition computed exactly like a sale — this site's dedicated post on the mechanic covers why Publication 463's "like-kind exchange" language for trade-ins is pre-2018 and no longer applies; the $31,000 figure here is simply treated as the amount realized.)

node -e "
// ===================================================================
// 2026 standard mileage: deduction rate split vs. flat depreciation component
// ===================================================================
const RATE_H1 = 0.725;            // Notice 2026-10 Sec.3 -- Jan 1 - Jun 30, 2026
const RATE_H2 = 0.76;             // Announcement 2026-11 -- Jul 1 - Dec 31, 2026
const DEPR_COMPONENT_2026 = 0.35; // Notice 2026-10 Sec.4 -- flat all year, unchanged by Announcement 2026-11

const milesH1 = 5400;
const milesH2 = 6600;
const totalBusinessMiles = milesH1 + milesH2;
const totalMiles = 20000;
const businessUsePct = totalBusinessMiles / totalMiles;
const personalUsePct = 1 - businessUsePct;

console.log('=== The rate that DID split: 2026 Schedule C mileage deduction ===');
const deductionH1 = milesH1 * RATE_H1;
const deductionH2 = milesH2 * RATE_H2;
const totalDeduction = deductionH1 + deductionH2;
console.log('H1 deduction (5,400 mi x 0.725):', deductionH1.toFixed(2));
console.log('H2 deduction (6,600 mi x 0.76):', deductionH2.toFixed(2));
console.log('Total 2026 mileage deduction:', totalDeduction.toFixed(2));
console.log('Business-use %:', (businessUsePct * 100).toFixed(1) + '%');
console.log();

console.log('=== The rate that did NOT split: basis reduction (CORRECT method) ===');
const correctBasisReduction = totalBusinessMiles * DEPR_COMPONENT_2026;
console.log('Total 2026 business miles (both halves combined):', totalBusinessMiles);
console.log('Correct basis reduction = 12,000 mi x flat $0.35 =', correctBasisReduction.toFixed(2));
console.log();

console.log('=== The WRONG method: assuming the component scaled with the rate ===');
const rateIncreaseRatio = RATE_H2 / RATE_H1;
const wrongH2Component = DEPR_COMPONENT_2026 * rateIncreaseRatio;
console.log('Rate increase ratio H1->H2 (0.76/0.725):', rateIncreaseRatio.toFixed(6));
console.log('Incorrectly scaled H2 depreciation component:', wrongH2Component.toFixed(6));
const wrongBasisReduction = milesH1 * DEPR_COMPONENT_2026 + milesH2 * wrongH2Component;
console.log('Wrong basis reduction (H1 at 0.35, H2 at scaled 0.3669):', wrongBasisReduction.toFixed(2));
const reductionOverstatement = wrongBasisReduction - correctBasisReduction;
console.log('Overstatement of basis reduction vs. correct method:', reductionOverstatement.toFixed(2));
console.log();

const originalCost = 34000;
const salePrice = 31000;

console.log('=== Pub. 544: mixed-use property is split BEFORE figuring gain or loss ===');
console.log('Pub. 544: \"if you sell or exchange property you used partly for business...');
console.log('and partly for personal purposes, you must figure the gain or loss...');
console.log('separately for the business... part and the personal-use part... You must');
console.log('allocate the selling price... and the basis of the property between the');
console.log('business... part and the personal part... You can\'t deduct a loss on the');
console.log('personal part.\"');
console.log();
console.log('Business-use %:', (businessUsePct * 100).toFixed(1) + '%');
console.log('Personal-use %:', (personalUsePct * 100).toFixed(1) + '%');
const businessCost = originalCost * businessUsePct;
const personalCost = originalCost * personalUsePct;
const businessRealized = salePrice * businessUsePct;
const personalRealized = salePrice * personalUsePct;
console.log('Business-use share of original cost (60% x $34,000):', businessCost.toFixed(2));
console.log('Personal-use share of original cost (40% x $34,000):', personalCost.toFixed(2));
console.log('Business-use share of the $31,000 trade-in (amount realized):', businessRealized.toFixed(2));
console.log('Personal-use share of the $31,000 trade-in (amount realized):', personalRealized.toFixed(2));
console.log();

console.log('=== Business-use part: adjusted basis and gain (CORRECT depreciation component) ===');
// The depreciation component is computed entirely from business miles, so the full
// $4,200.00 deemed depreciation reduces ONLY the business-use share of basis -- the
// personal-use share was never depreciated and keeps its original, undiminished cost.
const businessAdjBasis = businessCost - correctBasisReduction;
const businessGain = businessRealized - businessAdjBasis;
console.log('Business-use adjusted basis (20400.00 - 4200.00 depreciation):', businessAdjBasis.toFixed(2));
console.log('Business-use gain (18600.00 - 16200.00):', businessGain.toFixed(2));
const sec1245Recapture = Math.min(businessGain, correctBasisReduction);
console.log('Sec.1245 ordinary-income recapture (gain is less than total deemed depreciation, so the entire business-use gain is ordinary):', sec1245Recapture.toFixed(2));
console.log();

console.log('=== Personal-use part: gain or loss, kept SEPARATE and never netted ===');
const personalAdjBasis = personalCost; // no depreciation ever applies to the personal-use share
const personalResult = personalRealized - personalAdjBasis;
console.log('Personal-use adjusted basis (no depreciation applies to the personal-use share):', personalAdjBasis.toFixed(2));
console.log('Personal-use result (12400.00 - 13600.00):', personalResult.toFixed(2));
console.log('Pub. 544: a loss on the personal-use part is NONDEDUCTIBLE -- it is dropped, not netted against the business gain.');
console.log();

console.log('=== The mistake this post used to make: netting the two ===');
const wronglyNetted = businessGain + personalResult;
console.log('Wrongly netted figure (2400.00 business gain + (-1200.00) personal loss):', wronglyNetted.toFixed(2));
console.log('Correct taxable ordinary income from the sale (business-use gain only):', businessGain.toFixed(2));
const understatement = businessGain - wronglyNetted;
console.log('Taxable-income UNDERSTATEMENT from wrongly netting the two:', understatement.toFixed(2));
console.log();

console.log('=== The separate $111.52 depreciation-scaling error, isolated to the business-use part ===');
// This is the SEPARATE, already-correct finding from earlier in the post: it is about
// mis-scaling the depreciation component itself, not about the business/personal split.
// Depreciation only ever touches the business-use share, so the wrong-method comparison
// belongs on the business-use gain, not on a whole-car or netted figure.
const businessAdjBasisWrongDepr = businessCost - wrongBasisReduction;
const businessGainWrongDepr = businessRealized - businessAdjBasisWrongDepr;
console.log('Business-use adjusted basis under the wrong depreciation-scaling method (20400.00 - 4311.52):', businessAdjBasisWrongDepr.toFixed(2));
console.log('Business-use gain under the wrong depreciation-scaling method (18600.00 - 16088.48):', businessGainWrongDepr.toFixed(2));
const businessGainOverstatement = businessGainWrongDepr - businessGain;
console.log('Business-use gain OVERSTATEMENT from the wrong depreciation-scaling method:', businessGainOverstatement.toFixed(2));
"

Output:

=== The rate that DID split: 2026 Schedule C mileage deduction ===
H1 deduction (5,400 mi x 0.725): 3915.00
H2 deduction (6,600 mi x 0.76): 5016.00
Total 2026 mileage deduction: 8931.00
Business-use %: 60.0%

=== The rate that did NOT split: basis reduction (CORRECT method) ===
Total 2026 business miles (both halves combined): 12000
Correct basis reduction = 12,000 mi x flat $0.35 = 4200.00

=== The WRONG method: assuming the component scaled with the rate ===
Rate increase ratio H1->H2 (0.76/0.725): 1.048276
Incorrectly scaled H2 depreciation component: 0.366897
Wrong basis reduction (H1 at 0.35, H2 at scaled 0.3669): 4311.52
Overstatement of basis reduction vs. correct method: 111.52

=== Pub. 544: mixed-use property is split BEFORE figuring gain or loss ===
Pub. 544: "if you sell or exchange property you used partly for business...
and partly for personal purposes, you must figure the gain or loss...
separately for the business... part and the personal-use part... You must
allocate the selling price... and the basis of the property between the
business... part and the personal part... You can't deduct a loss on the
personal part."

Business-use %: 60.0%
Personal-use %: 40.0%
Business-use share of original cost (60% x $34,000): 20400.00
Personal-use share of original cost (40% x $34,000): 13600.00
Business-use share of the $31,000 trade-in (amount realized): 18600.00
Personal-use share of the $31,000 trade-in (amount realized): 12400.00

=== Business-use part: adjusted basis and gain (CORRECT depreciation component) ===
Business-use adjusted basis (20400.00 - 4200.00 depreciation): 16200.00
Business-use gain (18600.00 - 16200.00): 2400.00
Sec.1245 ordinary-income recapture (gain is less than total deemed depreciation, so the entire business-use gain is ordinary): 2400.00

=== Personal-use part: gain or loss, kept SEPARATE and never netted ===
Personal-use adjusted basis (no depreciation applies to the personal-use share): 13600.00
Personal-use result (12400.00 - 13600.00): -1200.00
Pub. 544: a loss on the personal-use part is NONDEDUCTIBLE -- it is dropped, not netted against the business gain.

=== The mistake this post used to make: netting the two ===
Wrongly netted figure (2400.00 business gain + (-1200.00) personal loss): 1200.00
Correct taxable ordinary income from the sale (business-use gain only): 2400.00
Taxable-income UNDERSTATEMENT from wrongly netting the two: 1200.00

=== The separate $111.52 depreciation-scaling error, isolated to the business-use part ===
Business-use adjusted basis under the wrong depreciation-scaling method (20400.00 - 4311.52): 16088.48
Business-use gain under the wrong depreciation-scaling method (18600.00 - 16088.48): 2511.52
Business-use gain OVERSTATEMENT from the wrong depreciation-scaling method: 111.52

Five things to notice, in order:

1. The deduction and the basis reduction move on completely different arithmetic. Priya's $8,931.00 deduction is a sum of two different rates applied to two different mile counts. Her $4,200.00 basis reduction is one rate applied to one combined mile count. Nothing requires — or even suggests — that these use parallel structures just because they both derive from "the standard mileage rate."

2. The wrong method doesn't produce a huge error, but it produces a real and entirely avoidable one. $111.52 isn't going to trigger an audit by itself. It's also not zero, and the method that produces it — scaling the depreciation component by the same ratio as the published rate increase — looks like careful work rather than a guess. That's exactly the kind of error that survives a return review: it's derived from real numbers using a plausible-sounding rule that simply isn't the rule the IRS published.

3. The error compounds in the direction that costs the taxpayer, not the IRS — and it lands entirely on the business-use share. Overstating the basis reduction understates the business-use adjusted basis, which overstates the business-use taxable gain on a later sale — $111.52 of ordinary income Priya wouldn't actually owe tax on, on top of the correct $2,400.00, if the wrong depreciation-scaling method survived to the sale and wasn't caught before filing.

4. The entire business-use gain is Section 1245 ordinary income, because it's smaller than the total deemed depreciation. Priya's $2,400.00 business-use gain is less than the $4,200.00 she was deemed to have depreciated for the year, so the entire gain — not just part of it — is ordinary income under Section 1245, consistent with Publication 463's framing that "the portion of any gain that is due to depreciation... will be treated as ordinary income."

5. The business-use gain and the personal-use loss are figured separately, and the personal-use loss simply disappears. Priya's trade-in produces a $2,400.00 gain on the 60% of the car that was business property and a $1,200.00 loss on the 40% that was personal property. IRS Publication 544 requires exactly this split for property used partly for business and partly for personal purposes — "you must figure the gain or loss on the sale or exchange separately for the business... part and the personal-use part" — and then states plainly: "You can't deduct a loss on the personal part." Netting the two to report a single $1,200.00 combined figure, as if the personal loss offset the business gain, understates taxable ordinary income by the full $1,200.00: the correct figure for Form 4797 is $2,400.00, not $1,200.00.

What Happens at Sale, and Where Self-Employment Tax Does (and Doesn't) Enter

Priya's $2,400.00 business-use gain routes to Form 4797 Part III, the ordinary disposition of a business asset — the same place a straight sale, trade-in, or total loss of a standard-mileage vehicle has always been reported, as this site's coverage of selling a depreciated business vehicle and a totaled standard-mileage vehicle both walk through for their own fact patterns. The $1,200.00 loss on the personal-use 40% of the car never reaches Form 4797 at all — Publication 544 makes a loss on the personal-use part of mixed-use property nondeductible, so there's no line to put it on, and it is never available to reduce the business-use gain.

What's worth flagging explicitly: the Instructions for Form 4797 contain exactly one sentence about self-employment tax, and it sits under Part IV, Column (b) — the recapture that applies when a vehicle's business use drops to 50% or less, covered in depth in this site's post on that specific recapture. That note states the business-use portion of the Part IV recapture amount is "subject to self-employment tax," because it's reported as "other income" on the same Schedule C the original deduction hit. No parallel note exists for Part III, where Priya's ordinary sale gain is reported. Her $2,400.00 recapture is ordinary income taxed at ordinary rates — but it isn't flagged in the form instructions as self-employment income the way the Part IV scenario explicitly is.

What This Doesn't Change

• You still need two deduction rates for 2026, not one. The entire point of this site's main 2026 mileage rate post stands: split your business miles at July 1 and apply $0.725 and $0.76 respectively to compute what you deduct.
• This doesn't apply to the actual expense method. A vehicle depreciated under MACRS uses the Publication 946 percentage tables, not a per-mile component, and the disposition-year mechanics for that method are entirely different.
• You still can't switch methods mid-year. Switching between the standard mileage rate and actual expenses is a once-a-year decision governed by its own rules, unrelated to the mid-year rate revision discussed here.
• The $0.35 figure is specific to 2026. Each year the depreciation component is published fresh in that year's mileage notice — 26¢ in 2022, 28¢ in 2023, 30¢ in 2024, 33¢ in 2025, 35¢ in 2026 — and a future mid-year revision, if one ever happens again, would need its own announcement to change it, exactly as Announcement 2026-11 didn't this time.

Common Mistakes to Avoid

1. Assuming the depreciation component split at July 1 because the deduction rate did. It didn't. Notice 2026-10's Section 4 states one figure for the entire year, and Announcement 2026-11 never amended it.
2. Scaling the depreciation component by the same percentage as the rate increase. That produces a real, quantifiable overstatement of basis reduction — $111.52 in the worked example — even though the arithmetic looks careful.
3. Netting a mixed-use vehicle's business-use gain against its personal-use loss. If the car was driven for both business and personal use, IRS Publication 544 requires you to figure gain or loss separately for the business-use part and the personal-use part — a loss on the personal-use part is nondeductible, full stop, not a number to net against the business-use gain. This is an easy mistake to make precisely because the nondeductible personal loss looks like it should offset something; Pub. 544 forbids it. In the worked example, netting the two understates taxable ordinary income by $1,200.00 — $2,400.00 is the correct figure for Form 4797, not the netted $1,200.00.
4. Forgetting the depreciation component exists at all. You never see it on Schedule C; it only matters when you sell, trade, or total the vehicle, and by then the records needed to compute it correctly need to already exist.
5. Confusing the Form 4797 Part III sale-gain recapture with the Part IV business-use-drop recapture. Only the latter is specifically flagged in the form instructions as subject to self-employment tax.
6. Using a different year's depreciation component for the wrong year's miles. Multiply each year's business miles by that specific year's published component — 2026 miles use 35¢, 2025 miles used 33¢ — and sum the results; don't apply one year's rate to another year's mileage.

How CentSense Helps

CentSense doesn't compute your vehicle's adjusted basis automatically — that's a once-a-year-or-less calculation best confirmed with your preparer when you sell or trade a car — but it solves the recordkeeping problem underneath it:

• Every trip is logged with date, destination, business purpose, and mileage, automatically split by the date it happened — exactly what you need to apply $0.725 or $0.76 to the right miles, and to total your full-year business miles correctly for the depreciation component calculation
• Your mileage log and receipt expenses export together in one CPA-ready file, so your preparer has the actual mile counts for each half of 2026 rather than an end-of-year estimate
• Year-round visibility into your total business miles means you know your running basis reduction well before you decide whether to sell or trade a vehicle, instead of reconstructing it after the fact

For the mechanics this post builds on, see The 2026 IRS Mileage Rate for the deduction-side rate split, The Depreciation Component of the Standard Mileage Rate for the general year-by-year basis mechanic, Selling a Depreciated Business Vehicle Mid-Year for the actual-expense-method disposition rules, and Section 280F Recapture Below 50% Business Use for the self-employment-tax contrast.

Authoritative References

• Notice 2026-10 — 2026 Standard Mileage Rates, Section 3 (rates) and Section 4 (basis reduction amount) (IRS, raw PDF)
• Internal Revenue Bulletin 2026-29, containing Announcement 2026-11 — mid-year revision to the 2026 standard mileage rates, effective July 1, 2026 (IRS)
• Rev. Proc. 2019-46, Section 4.04 — depreciation treatment under the business standard mileage rate (IRS, raw PDF)
• 26 U.S.C. §1016 — Adjustments to basis, including subsection (a)(2) (Cornell LII)
• IRS Publication 463 — Travel, Gift, and Car Expenses, "Disposition of a Car" and "Rate of Depreciation Allowed in Standard Mileage Rate"
• IRS Publication 544 — Sales and Other Dispositions of Assets, "Property Used Partly for Business or Rental"
• Instructions for Form 4797 — Sales of Business Property, Part III and Part IV
• 26 U.S.C. §170 — Charitable, etc., contributions and gifts, including subsection (i) (Cornell LII)

Two rates live inside "the 2026 standard mileage rate," and only one of them split at July 1. Start a free CentSense account to keep a dated, split-ready mileage log all year, so whichever rate you need — the deduction rate for this year's Schedule C or the depreciation component for the year you eventually sell — you have the exact mile counts to apply it to. Free tier includes 10 AI scans a month, no credit card required — or upgrade to the Solo plan for $5/month for unlimited scans, mileage tracking, and a CPA-ready CSV export. Start free →

This guide is general education for U.S. self-employed freelancers filing in 2026. It is not personalized tax advice. Your specific basis, business-use percentage, and gain or loss on any vehicle disposition are fact-specific determinations. Consult a CPA or EA before relying on any figure in this post for your own return.