IRS Unveils New Tax Breaks for Workers in 2026
Atume Terfa
The Internal Revenue Service (IRS) has announced a new round of tax adjustments set to take effect in the 2026 tax year, unveiling measures aimed at easing the financial pressure on workers, freelancers and small business owners as inflation continues to shape household and operating costs.
At the centre of the update is an increase in the standard mileage rate for business use of personal vehicles. From January 1, 2026, taxpayers will be able to deduct 72.5 cents per mile driven for work purposes, up from 70 cents in 2025. The change is expected to deliver meaningful relief to self-employed professionals, gig workers, delivery drivers and entrepreneurs who rely heavily on personal vehicles for business.
Not all mileage rates are moving in the same direction, however. The IRS confirmed that deductions for medical travel and qualifying moving expenses for certain military and intelligence personnel will dip slightly to 20.5 cents per mile, while the rate for charitable travel remains unchanged.
According to the agency, the adjustments are part of its annual inflation review, designed to help taxpayers offset rising fuel, maintenance and vehicle ownership costs without the burden of tracking every expense. Taxpayers still retain the option of claiming deductions based on actual vehicle expenses if that method proves more beneficial.
Beyond mileage, the IRS’s 2026 inflation adjustments extend across the broader tax system. Millions of Americans are expected to benefit from higher standard deductions, revised tax brackets, and increased contribution limits for selected credits and savings accounts. Under the new thresholds, single filers will be eligible for a standard deduction of $16,100, while married couples filing jointly can deduct up to $32,200.
The changes also incorporate provisions from the One Big Beautiful Bill Act, passed in 2025, which locks in and expands several worker-friendly tax benefits. These include continued deductions for qualified tips and overtime income, alongside enhanced tax credits for employers offering support such as childcare benefits.
With the filing season still months away, tax professionals are advising workers and business owners to get ahead by organising key documents early — including W-2s, 1099s, bank statements and detailed mileage records — to take full advantage of the new rules.
Overall, the IRS says the 2026 updates strike a balance between inflation-driven adjustments and targeted policy reforms, with the goal of reducing tax burdens and improving fairness for America’s evolving workforce.
