Schedule C 2026: Two Mileage Rates, New Line 16b, and What Changed

Schedule C is the form a sole proprietor, freelancer, gig worker or single-member LLC owner uses to report business profit or loss on Form 1040. Every year the IRS revises it, and most years the changes are dates. For 2026, the changes touch the two expenses self-employed drivers care about most: the car and the loan that paid for it.

Line 9: one year, two mileage rates

The IRS normally sets one business mileage rate for the year in December. For 2026, it set 72.5 cents per mile in Notice 2026-10, then raised it in the middle of the year. Announcement 2026-11, published in Internal Revenue Bulletin 2026-29 on July 13, 2026, revised the rates “from recent increases in the price of fuel”: 76 cents per mile for business, and 23.5 cents for medical and moving purposes, effective for expenses paid or incurred on or after July 1, 2026. The charitable rate stays at 14 cents, because section 170(i) of the tax code fixes it.

The last time the IRS did this was in 2022, when the business rate moved from 58.5 cents to 62.5 cents on July 1. The draft Schedule C instructions spell out the 2026 method in three steps:

• multiply business miles driven from January 1 to June 30, 2026, by 72.5 cents;
• multiply business miles driven from July 1 to December 31, 2026, by 76 cents;
• add parking fees and tolls, and enter the total on line 9.

Take a delivery driver who logs 12,000 business miles in 2026: 5,000 in the first half and 7,000 in the second. The deduction is 5,000 × $0.725 = $3,625, plus 7,000 × $0.76 = $5,320, for $8,945 before parking and tolls. Applying 72.5 cents to all 12,000 miles would give $8,700, leaving $245 unclaimed. Applying 76 cents to all of them would give $9,120, which overclaims by $175.

The split does not appear on the form. Part IV, line 44, still asks for one total of business, commuting and other miles for 2026. That puts the burden on your records: a mileage log with dates is what shows how many miles fell on each side of July 1. A log that only shows annual totals cannot support the higher rate for any of them.

The standard mileage rate still has its usual conditions. You can use it for 2026 only if you owned the vehicle and used the standard rate in the first year you put it in service, or if you lease it and use the standard rate for the whole lease. If you use the standard rate, you cannot also deduct depreciation, lease payments or actual operating costs.

Line 16b: vehicle loan interest gets its own line

On the 2025 form, line 16 had two entries: 16a for mortgage interest and 16b for “Other.” The 2026 draft has three:

The new line 16b is for “interest paid or accrued on debt incurred to purchase a vehicle that is used in your trade or business,” and only the business-use share of it. The instructions add, in a caution under line 9, that the business-use portion of vehicle loan interest goes on line 16b “regardless of whether you use the business standard mileage rate or the actual costs of operating your vehicle.” Under the standard rate, the business share of personal property tax on the vehicle goes on line 23. Under actual expenses, depreciation goes on line 13 and lease payments on line 20a. Landlords get the same split on Schedule E for 2026, where the vehicle loan line is 13a.

The reason for the new line is the car loan interest deduction created by the One Big Beautiful Bill Act and claimed on Schedule 1-A. The same loan can now produce two deductions, on two forms, for two different shares of the interest. The draft instructions draw the line: “Deduct only the business-use portion of the vehicle loan interest on Schedule C,” and the personal-use portion may be deductible on Schedule 1-A. If you claim interest on Schedule 1-A, “you can’t claim a deduction for that same interest on Schedule C.”

Here is how that works for a freelancer who financed a new car and drove 20,000 miles in 2026, 12,000 of them for business. Business use is 60 percent. If the lender’s statement shows $4,000 of interest for the year, $2,400 goes on Schedule C line 16b. The other $1,600 can go to Schedule 1-A only if the loan and the vehicle meet that deduction’s tests, which include a new vehicle whose original use began with you, final assembly in the United States, the $10,000 cap and the income phase-out that starts at $100,000 of modified AGI, or $200,000 on a joint return. Our 2026 Schedule 1-A draft guide covers those tests, and the Form 1098-VLI guide explains the lender statement that reports the interest.

The two shares are not worth the same. The $2,400 on Schedule C lowers net profit, so it reduces self-employment tax as well as income tax: at the 15.3 percent combined rate on 92.35 percent of net earnings, it saves about $339 of self-employment tax for someone below the Social Security wage base. The $1,600 on Schedule 1-A lowers only income tax, because Schedule 1-A deductions come after adjusted gross income, on line 13a of the 2026 Form 1040 draft, and do not touch Schedule SE. The business share has to be real, though: it follows the business-use percentage your mileage log supports, not the split that saves the most tax.

Line I and lines 10 and 11: the $2,000 threshold

Line I asks: “Did you make any payments in 2026 that would require you to file Form(s) 1099?” The draft instructions say that for 2026, “the information reporting threshold for certain payments reported on Forms 1099 increased from $600 to $2,000.” The same $2,000 figure now appears under line 10, commissions and fees, and line 11, contract labor, where the instructions say you must file Form 1099-NEC for payments “of $2,000 or more during the year.”

So a designer who paid a freelance editor $1,500 in 2026 would have answered yes under the old $600 threshold and now answers no, unless another payment crosses a threshold. The deduction itself does not change: the $1,500 is still deductible on line 11 whether or not a 1099 is required. The threshold applies to payments made after December 31, 2025, and is adjusted for inflation from 2027; see the Form 1099-NEC guide for 2026 and 2027.

Line 24b: meals for employees

The 50 percent limit for business meals with clients, customers and other business contacts is unchanged, and so is the 80 percent rate for workers subject to Department of Transportation hours-of-service limits, such as interstate truck drivers. What changed applies to a sole proprietor with employees. For expenses “paid or incurred after 2025,” no deduction is allowed for meals provided to employees at an employer-operated facility, or meals provided for the convenience of the employer. Before 2026, those meals were 50 percent deductible.

The other 2026 changes

The rest of the What’s New and Reminders lists, plus one layout change on the form, either repeat amounts already set for 2026 or affect few Schedule C filers:

• Section 179. The maximum expense deduction is $2,560,000, reduced dollar for dollar once section 179 property placed in service exceeds $4,090,000. Those are the Rev. Proc. 2025-32 figures; for 2027, see the section 179 projection.
• Bonus depreciation. Certain property acquired and placed in service after January 19, 2025, may qualify for 100 percent bonus depreciation, claimed through Form 4562.
• Energy efficient commercial buildings. The section 179D deduction on line 27a is available only for property whose construction began before July 1, 2026.
• Gambling losses. For professional gamblers who report on Schedule C, losses are limited to the lesser of 90 percent of losses or gambling winnings.
• Film, TV and theater productions. The election to expense production costs is no longer available for productions starting after 2025, though bonus depreciation may apply.
• Business address. Line E on the form now splits the address into separate fields for number and street, apartment number, city, state and ZIP code. The instructions still ask for a street address rather than a box number.

Nothing in the draft changes who files Schedule C or how profit flows to Schedule 1 and Schedule SE. Net profit on line 31 still goes to Schedule 1 (Form 1040), line 3, and to Schedule SE, line 2, and it may still qualify for the qualified business income deduction, which the 2026 Form 1040 draft moves to line 13b.

What to do before filing

1. Split your 2026 miles at July 1. If your mileage app or log can export by date, total the business miles for January through June and for July through December separately.
2. Find the year’s interest on the vehicle loan. A Form 1098-VLI or the lender’s year-end statement gives the figure; multiply it by the business-use percentage for line 16b.
3. Decide on the personal share. Check whether the personal-use portion qualifies on Schedule 1-A, and never put the same dollars on both forms.
4. Recheck your 1099 list. Only payees at $2,000 or more for 2026 need a Form 1099-NEC for nonemployee compensation, which is due January 31 in most years; in 2027, January 31 falls on a Sunday, so the deadline is February 1, 2027.

Sources

• Internal Revenue Service — Draft Instructions for Schedule C (Form 1040) (2026), dated October 8, 2026: What’s New; Line I; Line 9; Lines 10 and 11; Lines 16a, 16b and 16c; Line 24b
• Internal Revenue Service — Draft Schedule C (Form 1040) (2026) and Schedule C (Form 1040) (2025), with the 2025 Instructions for Schedule C
• Internal Revenue Service — Internal Revenue Bulletin 2026-29, Announcement 2026-11 (revised standard mileage rates from July 1, 2026), and Notice 2026-10 (2026 standard mileage rates)
• Internal Revenue Service — Standard mileage rates, table of rates for all years, including January 1 to June 30 and July 1 to December 31, 2026
• Legal Information Institute, Cornell Law School — 26 U.S.C. 170, subsection (i), charitable mileage rate; 26 U.S.C. 1402, net earnings from self-employment