The Internal Revenue Service (IRS) has announced a new standard mileage rate for 2025, increasing by 3 cents to 70 cents per mile compared to the previous year.
2025 IRS Mileage Reimbursement Rates
The updated mileage rates are as follows:
- Business Use: The rate is set at 70 cents per mile, reflecting a 3-cent increase. This rate applies to vehicles used for business purposes, including cars, vans, pickups, and panel trucks.
- Charitable Organizations: The rate for driving in service of charitable organizations remains at 14 cents per mile.
These rates apply to both electric and hybrid-electric vehicles, as well as traditional gasoline and diesel vehicles.
The business use mileage rate is established based on an annual study assessing the fixed and variable costs of operating vehicles.
Significant changes under the Tax Cuts and Jobs Act impact deductions for vehicle use:
- Employee Travel Expenses: Taxpayers are prohibited from claiming deductions for unreimbursed employee travel costs.
- Moving Expenses: Deductions for moving expenses have been eliminated, except for active-duty Armed Forces members relocating under orders.
Options for Taxpayers
Taxpayers have the choice to use either the standard mileage rate or to calculate the actual costs of vehicle use. However, if opting for the standard mileage rate, it is usually required to select this method during the first year the vehicle is utilized for business. For leased vehicles, this rate must be applied throughout the entire lease period, including any extensions.
Using the 2025 IRS Mileage Rate
The IRS mileage rate for 2025 supports individuals who use personal vehicles for work-related tasks and incur corresponding expenses.
Self-Employed Individuals: Self-employed taxpayers can claim business mileage for 2025 when filing taxes in the following year, allowing for reimbursement of business-related mileage.
Employed Individuals: The situation for employees is more complicated. Due to the Tax Cuts and Jobs Act, employees are unable to deduct mileage expenses from the IRS, even without compensation from employers for business travel. This limits recovery of business mileage costs to employer reimbursement.
Employees are advised to adhere to the IRS mileage rate for 2024; however, employers are not legally bound to reimburse at this rate and may choose to cover actual expenses or provide lower reimbursement, given appropriate receipts are available.
This announcement outlines essential updates from the IRS for 2025, aimed at self-employed and employed individuals who depend on their vehicles for business activities.
Further details regarding maximum automobile costs for allowances under a Fixed and Variable Rate (FAVR) plan and the fair market value for employer-provided vehicles are available in official IRS documentation.
The adjustments in mileage rates aim to reflect ongoing economic changes and the rising costs of vehicle operation.
