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2026 Tax Update: Mileage Rates, The Return of the "Subsidy Cliff," and Paperless Tax Payments

 

As we settle into 2026, the IRS has released several crucial updates that affect individual taxpayers, business owners, and military families. From the return of stricter healthcare subsidy limits to a new savings vehicle for children, here is what you need to know for the coming tax year.

 

2026 Standard Mileage Rates

The IRS has adjusted the standard mileage rates for 2026. If you use your vehicle for business, medical, or charitable purposes, make sure you update your logs to reflect these new figures.

• Business: 72.5 cents per mile (up from 70.0 cents in 2025).

• Medical & Moving: 20.5 cents per mile (down from 21.0 cents in 2025).

• Charitable: 14.0 cents per mile (unchanged).

• Depreciation Portion: 35.0 cents per mile (up from 33.0 cents).

 

Note: Deductions for moving expenses are currently restricted to active-duty members of the Armed Forces moving due to military orders.

 

Important: The "Premium Tax Credit Cliff" is Back

A significant change has occurred regarding the Premium Tax Credit (PTC), which helps subsidize health insurance costs. The enhanced rules under the American Rescue Plan have expired as of the end of 2025. Because recent legislation (H.R. 5371) did not extend these enhancements, the rules have reverted to 2020 levels.

 

What this means for you:

• The 400% Cliff: Beginning in 2026, if your household income is 400% or more of the federal poverty line, you are no longer eligible for any premium tax credit. You will be responsible for 100% of your health insurance costs.

• Higher Contributions: Taxpayers below the 400% threshold will likely see their required contribution percentages increase compared to 2021–2025 levels.

 

Payments and Refunds: The Shift to Digital

The IRS is aggressively transitioning away from paper checks under Executive Order 14247.

• Receiving Refunds: The IRS largely stopped issuing paper refund checks as of September 30, 2025. You should ensure the IRS has your direct deposit information to avoid delays.

• Paying the IRS: While the goal is fully electronic payments by 2027, the IRS will still accept paper checks for 2025 tax returns and 2026 estimated tax payments.

 

"Mailed on Time" Might Not Be Enough

New proposals from the US Postal Service regarding postmarks could affect whether your tax return is considered "timely filed".

 

Automated machine postmarks applied at processing facilities might be dated days after you actually dropped the envelope in a mailbox. To ensure your return is marked as filed on the day you mail it, the new guidance recommends requesting a hand-stamped postmark at a retail postal counter or using a service like Certificate of Mailing.

 

Military Updates

For our service members, there is good news regarding recent payments:

 

• Supplemental Housing: The supplemental basic allowance for housing paid in December 2025 is non-taxable.

• Warrior Dividend: The $1,776 "Warrior Dividend" payments made to eligible active-duty and reserve members are classified as "qualified military benefits" and are excluded from gross income.