IRS Mileage Rate for 2025: What Can Businesses Expect for The Upcoming Year
Andjelka Prvulovic
Last update on:
January 6, 2025 8:43 AM
Published on:
The IRS has announced the federal mileage rates for 2025, with a notable increase for business use.
The standard mileage rate for business use in calendar year 2025 is 70 cents per mile, an increase of 3 cents from 2024. This adjustment reflects the continued rise in vehicle operating costs. The rates for medical and moving purposes will remain the same as in 2024.
Businesses preparing budgets for the upcoming tax year should incorporate annual rate adjustments in their existing mileage reimbursement policies to reflect the IRS standard mileage rate for 2025.
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Beginning January 1, 2025, the IRS will implement new standard mileage rates for the use of a car, van, pickup, or panel truck. These rates are used to calculate the deductible costs of operating vehicles for business, charitable, medical, and moving purposes.
70 cents per mile driven for business use, up 3 cents from 2024.
21 cents per mile driven for medical purposes, the same as in 2024.
21 cents per mile driven for moving purposes for qualified active-duty members of the Armed Forces, unchanged from 2024.
14 cents per mile driven in service of charitable organizations, equal to the rate in 2024.
PRO TIP: Managing mileage reimbursement effectively is crucial for various types of businesses and self-employed individuals. Explore our Guide to Employee Mileage Reimbursement to learn the best practices for reimbursing your teams accurately and efficiently. For a quick and easy way to determine reimbursement amounts, use our Free Mileage Reimbursement Calculator, designed to simplify your budgeting and expense management.
What was the IRS mileage rate for 2024?
The IRS mileage reimbursement rates for 2024 were:
67 cents per mile for business use (an increase of 1.5 cents from the 2023 IRS mileage rate)
21 cents per mile for medical/moving purposes for qualified active-duty members of the Armed Forces (decreasing by 1 cent from 2023)
14 cents per mile for charitable organizations. This rate is set by statute, and it remains unchanged
The standard mileage rates for 2024 for calculating deductible costs associated with operating vehicles for various purposes were effective starting January 1, 2024, through the end of the year.
Historical IRS mileage rates
Historical mileage rates overview
What was the IRS mileage rate in 2023?
In 2023, the IRS rate for business-related mileage was set at 65.5 cents per mile.
Meanwhile, the standard rate for mileage related to medical or moving purposes was 22 cents per mile.
The IRS officially published its optional standard mileage rates for 2023 on December 29th:
65.5 cents per mile driven for business purposes (up 3 cents from the second half of 2022)
22 cents per mile driven for medical/moving purposes (unchanged from the second half of 2022)
The rate per mile for charitable purposes remains at 14 cents
These rates came into effect on January 1, 2023 and remained in place through the end of the year.
What were the IRS mileage rates in 2022?
After rates decreased in 2020 and 2021, mileage rates for business travel and medical or moving
purposes went up in 2022. With higher average driving costs, increased fuel prices, rising
insurance rates, and lower depreciation rates, changes to the IRS mileage rates were inevitable.
The IRS officially published its optional standard mileage rates for 2022 on December 17th:
58.5 cents per mile driven for business purposes (up 2 cents from the 2021 rate)
18 cents per mile driven for medical/moving purposes (up 2 cents from the 2021 rate)
The rate per mile for charitable organizations remains at 14 cents
Due to increasing average gas prices, the IRS raised the standard mileage rates again for the second half of 2022,
effective July 1st:
62.5 cents per mile driven for business purposes
22 cents per mile driven for medical/moving purposes
14 cents per mile in service of charitable organizations (unchanged)
IRS mileage rates for 2021 and previous trends
The IRS mileage rate for 2021 was issued on December 22nd, 2020.
From January 1st, 2021 through January 1st, 2022, the optional standard mileage rates were:
56 cents per mile for business purposes (down 1.5 cents from 2020)
16 cents per mile for medical/moving purposes (down 1 cent from 2020)
14 cents per mile for charitable purposes (set by statute)
These rates dropped slightly compared to 2020 (57.5 cents for business and 17 cents for medical/moving).
As you’ll see in the next section, there was an upward trend again in 2022, influenced by
economic factors such as higher fuel prices and rising insurance costs.
Historical mileage rates overview
A closer look at the last five years shows that the rates for business expenses increased from
53.5 cents per mile in 2017 to 58 cents per mile in 2019. Since 2019, the IRS rate has slowly
declined, dropping from 57.5 cents in 2020 to 56 cents in 2021, and then climbing back in 2022.
A similar trend applies to the standard rate for medical/moving purposes. The rate rose from
2016 to 2018 and peaked in 2019, then gradually decreased until 2021, before going up again in 2022.
As economic factors shifted, including fuel prices and depreciation rates, the IRS adjusted
the mileage rates accordingly.
How is the IRS mileage rate determined?
How are mileage rates set, and what factors determine the IRS mileage rate for 2025?
1. Fuel costs play a significant role in determining the mileage rate. Fluctuations in gasoline prices are a primary driver. For instance, when fuel prices are rising, such as during the post-COVID recovery phase, the IRS often increases the mileage rate to help taxpayers offset higher fuel expenses.
2. Vehicle maintenance and depreciation are also critical factors. Each year the IRS assesses the average costs of vehicle repairs, maintenance, and depreciation. Increased maintenance costs resulting from increased labor or parts prices can often lead to higher mileage rates.
3. Insurance and registration fees vary from state to state and yearly, influencing the overall mileage rate. For example, the hurricanes and wildfires seen in 2017 and 2018 led to a surge in insurance claims, causing premiums to rise in 2019. These increased insurance costs were one of the reasons the IRS raised the mileage rate for business use.
4. General Inflation and economic conditions affect all aspects of vehicle operation, from fuel and tires to routine services. The IRS accounts for inflation to ensure the mileage rate remains aligned with current economic conditions.
For example, the COVID-19 pandemic initially caused a decrease in driving as lockdowns and remote work became widespread. Insurers responded by issuing refunds and maintaining or even lowering rates temporarily.
However, as normalcy returned, supply chain disruptions and labor shortages increased the cost of car repairs, contributing to higher insurance premiums. The IRS took these rising costs into account when establishing the 2025 mileage rate.
How will the 2025 IRS mileage rate impact your business?
With higher gas prices, increasing vehicle maintenance costs, and rising insurance rates, the standard mileage rate in 2025 has increased to reflect the expenses associated with operating a vehicle.
An increase of just a few cents may not seem significant on its own, but reimbursing an additional 3 cents per mile for every business mile driven by your team members can quickly add up, leading to considerable expenses for your business.
This is another reason why reliable mileage tracking apps can save your company money: they enhance employee accountability and enable accurate mileage recording.
Understanding the standard IRS mileage rate
Also known as deductible mileage or mileage per diem, the standard mileage rate is the default cost per mile set by the IRS.
The IRS establishes this rate yearly for business, medical, and moving purposes. Congress determines the charity mileage rate, which does not change annually.
There are three standard mileage rates provided to taxpayers who deduct expenses associated with using personal vehicles for the above-mentioned purposes:
70 cents per mile for business use in 2025.
21 cents per mile for medical purposes, unchanged from 2024.
14 cents per mile for charitable activities, as set by statute.
Pro tip: The 2017 Tax Cuts and Jobs Act (TCJA) suspended moving expense deductions for miles driven for moving purposes, except for active-duty military personnel. Only armed service members relocating under permanent change-of-station orders can qualify for the deduction.
What does the business mileage rate cover?
If your employees use their personal vehicles for work-related purposes, it’s good to know that the same IRS mileage rate applies to all types of automobiles (cars, vans, pickup trucks, and panel trucks).
The mileage rate the IRS sets includes variable and fixed vehicle operating costs. Variable costs include maintenance (like periodic oil changes and tire rotations), gas, oil, and repairs.
On the other hand, insurance, registration, lease payments, and depreciation fall under the fixed costs of operating a vehicle.
Keep in mind that IRS mileage rates don’t cover tolls or parking fees. Additionally, these rates don’t vary by geographic location either.
When it comes to reimbursing vehicle expenses, businesses have several options, each with its own advantages and disadvantages.
Understanding these methods can help you select the most effective approach for your organization.
Standard mileage rate
A standard mileage rate is the most straightforward method. Under this approach, you multiply the IRS standard mileage rate by the number of business miles driven. This method simplifies the reimbursement process by eliminating the need to track individual vehicle expenses such as gas, maintenance, and insurance.
Typically, businesses must choose the standard mileage rate in the first year the vehicle is used for business purposes. If the vehicle is leased, this method must be consistently applied throughout the lease term, including any extensions or renewals.
The simplicity and ease of record-keeping make the standard mileage rate a popular choice for many companies.
Actual expense method
Alternatively, the actual expense method allows businesses to deduct the actual costs of operating a vehicle for business purposes. This includes expenses like gas, oil changes, repairs, insurance, and depreciation.
Unlike the standard mileage rate, the actual expense method requires detailed record-keeping and meticulous tracking of all vehicle-related costs. While this method can be more time-consuming, it may offer greater tax benefits for businesses with higher vehicle operating costs.
After the initial year of business use, taxpayers can switch between the standard mileage rate and the actual expense method, depending on which option provides a more advantageous tax outcome.
FAVR
Another option is the Fixed and Variable Rate (FAVR) model, which combines a fixed monthly allowance with a variable rate based on actual mileage driven.
This hybrid approach balances predictable budgeting with fairness, as employees receive a consistent base allowance while also being reimbursed for the miles they actually drive for business purposes.
Car allowance
Lastly, some enterprises opt for a flat rate allowance, providing employees with a fixed monthly reimbursement regardless of the number of miles driven. While this approach simplifies budgeting and payroll processing by offering a predictable expense, it can lead to overpayments if employees drive fewer miles than anticipated.
Additionally, flat rate allowances may incur additional taxes if the reimbursement exceeds the actual costs of work-related driving.
As a result, many companies prefer the per-mile reimbursement model, which aligns more closely with actual vehicle usage and helps prevent unnecessary expenses.
Choosing the right reimbursement method depends on your specific business needs. While car allowances may appear practical, they can result in overpaying employees and additional tax liabilities.
On the other hand, per-mile reimbursement based on the IRS standard mileage rate or the FAVR model tends to be more cost-effective and aligns better with actual usage, making it a preferred choice for most companies. Carefully evaluate your business's unique circumstances and consult with a tax professional to determine the most beneficial reimbursement strategy.
Do companies need to reimburse mileage at the IRS rate?
Federal law does not require employers to reimburse their employees for mileage. The 2025 IRS mileage rate is optional, just like the standard mileage rates for previous years.
However, state mileage reimbursement laws may apply in some jurisdictions, so employers must be mindful of state labor laws to remain compliant. In California, according to Labor Code 2802, employers must cover their employees’ business expenses, including the costs incurred when using their private vehicles for business purposes. If businesses are found to be non-compliant, they can face costly fines and lawsuits.
Mileage reimbursements are tax-free to the employer and the employee unless the reimbursement amount is higher than the actual cost of work-related driving.
In this case, the reimbursement would be considered taxable income.
Automated mileage tracking - The future of reimbursement expense management
Accurately tracking work mileage is important. If you are ever audited, you will need to produce a mileage log that details every trip your employees have taken.
Unfortunately, the traditional mileage tracking and record-keeping measures come with numerous issues. Manual mileage logs can be falsified by employees and are often found to contain mistakes.
Technological advances have eliminated the need to use pen-and-paper mileage logs, as there are many software solutions on the market today that automate mileage tracking and reimbursement expense management.
How can Timeero help me improve mileage tracking?
The best mileage tracking apps are designed to help you easily track business miles driven by your employees. Tracking apps such as Timeero, reduce the time drivers spend entering trip details by automatically recording GPS location throughout the workday.
Timeero can significantly boost your mileage tracking with its unique features.
Automated real-time tracking
Timeero excels in tracking your employees’ real-time location and mileage, offering a dynamic and automated approach to mileage tracking.
Timeero automatically tracks the mileage of employees who are driving on the clock.
With the help of drive detection technology, Timeero automatically begins tracking mileage when the predetermined speed threshold is met. With this feature in play, Timeero eliminates the need for manual input, which reduces errors and ensures accurate mileage records.
Segmented tracking
One of Timeero’s standout features is segmented mileage tracking. This tool divides an employee’s driving route into individual segments based on stops. You can open each stop on the map to display details such as:
Starting and ending times of business trips
Time spent at various job sites
Driving speed
Segmented Tracking provides managers with a birds-eye view of employee workdays.
To use segmented tracking, employees only need to clock in once at the start and once at the end of their workday. Employees do not need to clock in and out several times a day as they make multiple stops. The app captures all work-related activities throughout the day without employees needing to lift a finger.
This tool provides valuable insights into your employees’ driving behaviors, such as excessive speeding and unauthorized detours. With a reliable travel log, you can quickly address unwanted behaviors and enforce company policies.
Commuter mileage
Timeero allows you to easily distinguish between business and commuter mileage. Timeero’s commuter mileage feature can be configured to log mileage only when an employee travels beyond a predefined distance from their home to the workplace.
With this feature enabled, you can ensure that non-reimbursable commuting mileage is excluded from business mileage logs.
Shortest distance and suggested mileage for cost efficiency
Timeero’s shortest distance and suggested mileage feature helps you minimize fuel costs and reduce overall mileage reimbursement by ensuring that your employees follow the most efficient routes.
If you add locations to job assignments, the app will recommend the shortest driving route.
Timeero lets you view actual vs. suggested routes.
After each business trip, the app compares the actual mileage driven vs. the suggested distance.
Route replay for employee accountability
The route replay feature provides detailed insights into the routes taken by your employees.
Replay your employees' routes in detail.
The route replay overview shows breadcrumbs with timestamps and vehicle speed details, allowing managers to verify if their crew adheres to the suggested routes. This feature can promote employee accountability and significantly enhances your team's efficiency.
Smooth mileage reimbursement with accurate reporting and integration
Besides its advanced tracking features, Timeero streamlines the mileage reimbursement process by generating accurate and detailed reports based on precise and verifiable data.
Generate accurate mileage reports with just a few clicks.
Timeero's integrations with popular accounting and payroll software, such as QuickBooks, ADP, and Gusto, simplify the reimbursement process, reducing administrative overhead and minimizing the potential risk for errors.
To learn more about how Timeero can benefit your business, read our detailed Timeero review. If you would rather see Timeero’s features first hand, sign up for a free trial today.
Key takeaways
Standard IRS mileage rates are set each year in December for the upcoming year. On the federal level, these rates are optional and non-binding for employers. In some cases, state laws apply, and companies may be required to reimburse their employees to stay legally compliant.
Using the standard IRS mileage rate in 2025 may be the best way to develop an efficient and fair mileage reimbursement policy, as it provides employers with tax-deduction benefits.
Additionally, implementing the standard IRS mileage rate is a great way to attract and retain high-quality employees, the most valuable asset of every enterprise.
Andjelka is a skilled researcher and writer with 6+ years in digital marketing, specializing in SaaS and B2B content. With a background in sociology, social work, and journalism, she crafts strategy-driven content that resonates with audiences. Outside of work, she enjoys yoga, swimming, and relaxing with her cats and Leonard Cohen’s music.
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