Raising the “optional standard mileage rate” for tax deductions in 2025, IRS announces. The change permits taxpayers and businesses to claim more on their corresponding expense accounts under the headings of motor vehicle expenses for business and other purposes.
An addition of 3 cents to the previous year’s rate results from January 1, 2025, as regards the new rate of a business mileage deduction of 70 cents per mile. This is 14 cents more than the rate of 2021 and takes into account inflation and other economic factors.
Details of the 2025 mileage rates
The IRS mileage rates, applicable to various types of vehicles—including electric, hybrid, gasoline, and diesel-powered cars—are structured as follows:
- 70 cents per mile driven for business use: This rate marks an increase from 67 cents in 2024.
- 21 cents per mile for medical or moving purposes: This rate remains unchanged from 2024 and applies to qualified active-duty Armed Forces members.
- 14 cents per mile for charitable purposes: This rate is also unchanged and is set by statute.
These rates offer a simplified alternative for calculating vehicle expenses, eliminating the need for taxpayers to track and document actual costs. Businesses also frequently use these rates to reimburse employees for mileage.
Understanding Mileage Tax Deductions
Taxpayers who use their vehicles for business purposes or for qualified activities can select between either the standard mileage rate or calculating actual vehicle costs, like gas, maintenance, and depreciation. Under the Tax Cuts and Jobs Act, it was stated by the IRS that taxpayers were not able to claim miscellaneous itemized deductions for unreimbursed employee travel expenses.
Mileage still offers a significant benefit for individuals eligible to claim these unreimbursed deductions or receive reimbursements. For most businesses, the prescribed IRS mileage rate standards quickly become the baseline for fair and consistent employee reimbursements.
Each year, the IRS revises these rates based on the changing economic situations, thus updating the fuel prices as well as other associated costs to ensure that both taxpayers and businesses obtain fair deductions and reimbursement.
Read more: Financial power moves for 2025: Here’s how to freshen up your finances for the New Year.
Additional IRS Announcements
The IRS announcement about mileage rates coincides with broader updates in government policies and procedures:
- Government Shutdown and Travel: While holiday travelers may be concerned about the impact of a government shutdown, critical operations, including TSA and air traffic control, will continue uninterrupted.
- FAA Drone Restrictions: The Federal Aviation Administration (FAA) has issued temporary drone flight restrictions across key New York infrastructure due to security concerns.
- Musk and Global Politics: Elon Musk has drawn attention for his apparent endorsement of Germany’s far-right AfD party, reflecting his growing influence on political matters both in the U.S. and abroad.
Being aware of changes such as the IRS mileage rate can help individuals and organizations to strategically plan their finances for 2025 and beyond.
