The IRS has announced an increase in the standard mileage rate for business use in 2025, raising it by 3 cents to 70 cents per mile. This change impacts self-employed individuals, business owners, and employers who reimburse employees for work-related vehicle use. While the mileage rates for charitable organizations as well as medical and moving purposes remain unchanged, the 2025 updated business mileage rate can influence tax deductions and reimbursement strategies.
Understanding how this adjustment affects your tax filings and record-keeping is essential for maximizing deductions and ensuring compliance with Internal Revenue Service guidelines. The professional CPAs at Steward Ingram & Cooper, PLLC are sharing what you need to know about the 2025 mileage rate update and its tax implications.
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Overview of the Current IRS Mileage Rate
The IRS standard mileage rate serves as a benchmark for taxpayers who use their vehicles for business, medical, moving, or charitable purposes. It allows individuals to calculate fixed and variable costs based on a per-mile rate rather than tracking actual vehicle costs such as fuel, maintenance, and depreciation.
The federal mileage rate for business use raised to 70 cents per mile, a 3-cent increase from the 2024 rate. This adjustment reflects the changing costs associated with operating vehicles, including gas prices, maintenance, and insurance.
How to Claim Mileage at the Business Rate
The IRS has announced its 2025 standard mileage rates, with an increase for business use but no changes for charitable mileage and mileage for medical or moving purposes.
Effective January 1, 2025, the following mileage rates apply:
Business Use
70 cents per mile (up 3 cents from 2024)
Medical Purposes
21 cents per mile (unchanged from 2024)
Moving Purposes
21 cents per mile (unchanged from 2024, and only for qualified active duty members of the military)
Charitable Purposes
14 cents per mile (set by law, unchanged from 2024)
Business Use: 70 Cents Per Mile (Increased by 3 Cents)
The business mileage rate applies to self-employed individuals and businesses that deduct vehicle expenses for work-related travel.
The increase to 70 cents per mile means:
- Higher deductions for self-employed individuals who drive for business, such as real estate agents, consultants, and rideshare drivers.
- Businesses must update mileage reimbursement policies to align with the new IRS rate.
- Employers should ensure compliance when reimbursing employees for mileage expenses to avoid tax liability issues.
For those using the standard mileage rate instead of tracking actual expenses for business purposes, the 3-cent increase can lead to greater tax savings over the year.
Medical Mileage: 21 Cents Per Mile (Unchanged)
Taxpayers can still claim medical mileage deductions for travel related to healthcare, including trips to:
- Doctor’s offices, hospitals, and therapy sessions
- Pharmacies to pick up prescriptions
- Other qualified medical treatments as defined by the IRS
Since the rate remains at 21 cents per mile, taxpayers will not see an increase in deductions for medical-related travel. This deduction is only available to those who itemize their medical expenses and meet the IRS 7.5% of adjusted gross income (AGI) threshold.
Moving Mileage: 21 Cents Per Mile (Unchanged, for Armed Forces Only)
Under the Tax Cuts and Jobs Act (TCJA), the moving expense deduction is no longer available to most taxpayers. However, active-duty military members who are moving due to a permanent change of station can still claim this deduction.
Since the rate remains unchanged at 21 cents per mile, eligible military personnel will not see any changes in their deductible moving expenses.
Charitable Mileage: 14 Cents Per Mile (Unchanged, Set by Law)
The charitable mileage rate is set by Congress and does not adjust based on economic factors like fuel costs. It remains at 14 cents per mile for 2025.
This applies to:
- Volunteers who drive for nonprofit organizations
- Mileage driven for qualified charitable activities such as delivering meals or assisting with disaster relief
Since this rate is not adjusted annually by the IRS, it has remained the same for years despite rising vehicle expenses.
Who Benefits from the Increased Business Mileage Rate?
With the IRS increasing the business mileage rate to 70 cents per mile in 2025, many taxpayers stand to benefit from the higher deductible costs. Below are the key groups that can take advantage of this adjustment.
Self-employed professionals who drive for work, including consultants, real estate agents, and gig workers, can benefit from the increased rate for business miles. Since these individuals often use personal vehicles for client meetings, property showings, and service calls, tracking mileage correctly can lead to significant tax savings.
Small business owners who use personal or company-owned vehicles for daily operations can take advantage of the higher deduction. Whether driving for supplier visits, deliveries, or client meetings, businesses can offset costs by utilizing the new mileage rate. For those who reimburse employees for work-related travel, adjusting to the updated rate ensures compliance with IRS guidelines while keeping reimbursement fair and competitive.
Companies that rely on employees to travel frequently—such as sales teams, field technicians, and service providers—must ensure they update their reimbursement policies to align with the IRS increase. While employers are not required to use the IRS standard mileage rate for reimbursements, it is often used as a guideline to ensure fair and tax-compliant compensation for work-related driving.
Independent contractors for rideshare services (Uber, Lyft) and delivery platforms (DoorDash, Instacart, Amazon Flex) incur significant vehicle expenses throughout the year. Since these workers typically do not receive employer reimbursement, they must rely on mileage deductions to reduce their taxable income. The 3-cent increase per mile means a larger overall deduction for drivers who log thousands of miles annually.
Businesses that reimburse employees under a FAVR plan will need to adjust their mileage reimbursement structures to reflect the updated federal mileage rates. The IRS mileage increase affects how companies calculate reimbursement allowances, ensuring they cover both fixed costs (insurance, depreciation) and variable costs (fuel, maintenance) in a compliant manner.
Best Practices for Businesses and Taxpayers
To maximize tax deductions and ensure compliance with IRS regulations, businesses and individuals should follow these best practices when tracking and deducting mileage expenses.
The IRS requires detailed records for business mileage deductions, including the date, purpose, total miles driven, and destination. Using a mileage logbook or digital mileage tracking apps can help ensure accuracy and provide necessary documentation in case of an audit.
Taxpayers must decide between the standard mileage rate and the actual costs method. The standard mileage rate is simpler and works well for those who drive frequently, while the actual expense method may be more beneficial for those with high vehicle costs.
Employers who reimburse employees for work-related driving should adjust their reimbursement policies to reflect the new IRS mileage rate. While not mandatory, using the current IRS mileage rate ensures fair compensation and compliance with tax laws, reducing potential disputes or tax liabilities.
An experienced, reputable CPA can help determine the best deduction method for mileage expenses, ensuring maximum tax savings and compliance with IRS rules. For businesses, they can assist in structuring reimbursement policies to avoid tax issues. Additionally, a CPA can review records, prevent errors, and provide audit protection, giving taxpayers confidence in their deductions.
Maximize Your Tax Deductions with Proper Mileage Tracking
With the IRS increasing the standard mileage rate for business use in 2025, now is the time to ensure accurate bookkeeping and smart tax planning. Whether you’re self-employed, a business owner, or managing employee reimbursements, staying compliant with IRS regulations is key to maximizing deductions.
Contact our CPAs in Raleigh today by calling us at (919) 872-0866 or filling out our online contact form below.
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