IRS Increases Medical Mileage Rate Mid-Year

The IRS has announced a mid-year increase to the standard mileage rate for medical travel, affecting expenses incurred on or after July 1, 2026. While the change may seem modest, it is important for employers that sponsor Health Reimbursement Arrangements (HRAs), Health Flexible Spending Accounts (Health FSAs), or employees who contribute to Health Savings Accounts (HSAs).

Employers should understand how the updated rate applies and whether any administrative changes are needed.

New Medical Mileage Rate

For medical travel occurring:

• January 1 through June 30, 2026: 20.5 cents per mile
• July 1, 2026 and later: 23.5 cents per mile

The increase reflects the IRS’ decision to adjust the medical mileage rate during the year due to changing economic conditions.

What Expenses Qualify?

Mileage may be treated as a qualified medical expense when the travel is primarily for and essential to obtaining medical care. Common examples include trips to:

• Physician and specialist appointments
• Hospitals and outpatient facilities
• Physical therapy or rehabilitation appointments
• Medical testing or diagnostic services
• Pharmacies to obtain prescription medications

Parking fees and tolls associated with qualifying medical travel may also be eligible for reimbursement if permitted under the plan.

Impact on Health FSAs, HRAs, and HSAs

Transportation expenses that qualify as medical expenses under IRS rules may generally be reimbursed tax-free through a Health FSA, HRA, or HSA.

Employers should remember that the applicable reimbursement rate depends on when the medical travel occurred, not when the reimbursement request is submitted. For example:

• Travel through June 30, 2026 should be reimbursed using the 20.5 cent rate.
• Travel on or after July 1, 2026 should use the new 23.5 cent rate.

Employees submitting mileage claims that span both periods may need to calculate reimbursement using both rates.

Documentation Is Still Required

Employees requesting reimbursement for medical mileage should maintain adequate documentation to substantiate the expense. Generally, this includes the date of travel, the number of miles driven, the destination, and the medical purpose of the trip. Documentation supporting the underlying medical appointment or service may also be required, depending on the plan’s claims procedures.

Simply claiming a number of miles traveled is generally not sufficient. As with other medical expenses, Health FSAs and HRAs must have appropriate substantiation before reimbursement can be approved.

A Good Time for a Mid-Year Review

IRS mid-year changes are relatively uncommon, making them easy to overlook. Reviewing reimbursement procedures when these updates occur can help ensure eligible expenses are reimbursed accurately and consistently.

Employers that administer Health FSAs, HRAs, or HSAs should verify that their reimbursement processes reflect the new medical mileage rate for travel beginning July 1, 2026, helping employees receive the correct tax-free reimbursement for eligible medical transportation expenses while ensuring reimbursement requests are properly substantiated.