Three 2026 IRS Updates All Employers Should Know

As we begin 2026, the IRS and Social Security Administration have released updated thresholds for several key federal limits that affect payroll, benefits, and tax planning. Knowing these changes ensures you stay compliant and helps your employees plan more effectively.

Below are the most important updates for business mileage rates, 401(k) and retirement plan limits, and the Social Security taxable wage base for 2026.

Federal Mileage Rate Increases

2026 Business Mileage Rate: 72.5¢ per mile (up 2.5¢ from 2025)

Why it matters: Employees can no longer take a deduction on their personal taxes for the business use of their personal vehicle. This rate change represents the maximum amount that an employer can reimburse employees for the company use of the employee’s car, tax free. Any amount more is taxable as wages to the employee.

401(k) & Retirement Plan Contribution Limits

The IRS has increased several retirement plan limits for 2026, reflecting cost-of-living adjustments that help savers keep pace with inflation:

401(k), 403(b), and eligible 457(b) elective deferral limit: $24,500 (up from $23,500)
401(k) catch-up contribution (ages 50+): $8,000 (up from $7,500)
401(k) “Super catch-up” contribution (ages 60–63): $11,250 (unchanged)
Overall defined contribution limit (e.g., employer + employee): $72,000 (up from $70,000)

Why it matters: Higher contribution limits allow employees to save more each year in tax-advantaged retirement accounts, which can boost long-term retirement readiness and improve employee satisfaction.

Social Security Taxable Wage Base

2026 Social Security wage base: $184,500 (up from $176,100 in 2025)

Why it matters: This wage base determines the maximum amount of an employee’s earnings subject to Social Security payroll taxes. An increase means higher earnings will be taxable for Social Security, which affects both employee and employer tax withholding.

Ready to Make Sure You’re Prepared for 2026?

Federal threshold changes can have real impacts on payroll costs, retirement planning, and compliance, and small missteps can become expensive over time.

Schedule your free consultation with E1 today and get clear, practical guidance tailored to your business.