The IRS, which is short for Internal Revenue Service, has published an upward revision in the standard mileage rate for 2025, offering a negligible benefit to taxpayers and businesses. Thus beginning January 1, the increase in the business mileage rate by 70 cents per mile would be a 3-cent crawl above the 67-cent rating for 2024. The rise mirrors changing costs in the operation of personal vehicles and represents the first significant alteration in the rates for business mileage reimbursement.
Read more: What’s the earliest I can file my 2024 taxes? Key dates for 2025 tax season
What stays the same for other mileage rates?
the rates at which a vehicle can be used for other non-business purposes will remain the same in 2025. The IRS says:
- Medical or Moving Purposes for Active-Duty Armed Forces Members: 21 cents per mile.
- Charitable Purposes: 14 cents per mile. This is a statutorily set rate that doesn’t change from one year to another.
These rates also apply to all vehicle types: electric, hybrid-electric, gasoline, and diesel-powered automobiles.
This increase in the business mileage rate is coinciding with the increased costs of maintaining and owning cars. Mr. Phong Nguyen-the CEO of Motus- pointed out that “auto insurance premiums, maintenance costs, and repair expenses for cars tend to grow year by year”. However, Motus CEO Phong Nguyen said that for 2024 to be tough in terms of constant fluctuations in driving costs, fuel prices have decreased compared to 2023.
“So many factors keep crunching costs in driving in very strong ways,” Nguyen said. “It is important that business leaders support their employees who use their cars for work by putting in place fair and accurate measures for reimbursement while at the same time optimizing reimbursement spending to mitigate waste and risk.”
Understanding the standard mileage rate
The standard mileage rate provides a simple way for taxpayers and businesses alike to calculate how much automobile expense can be deducted for business use. This is a more convenient and less hassle-laden alternative as taxpayers would no longer track actual costs for fuel, repairs, and depreciation but rely instead on a standard flat amount to arrive at that deduction. Employers also rely on the rate in providing tax-free reimbursement to their employees in connection with personal-use vehicles for business purposes.
Despite this the standard mileage rate is an optional alternative taxpayers can use in determining the actual expenses of operating a vehicle instead of taking the actual costs.
The reason for this adjustment is to show the IRS’s commitment to adhering mileage rates to the reality of the economy. Employers would need to update their policies on reimbursements to comply with the new rate and to assure equitable support among employees utilizing their vehicle as part of their job.
All the details about these new changes to the mileage rate can be found in IRS Notice 2025-05, which provides guidance for businesses, self-employed professionals, and taxpayers alike.
This will help understand the changes by which organizations can help navigate through cost compliance and at the same time empower its mobile employees.
