2025 Mileage Rate Increase

If you use your vehicle for business purposes, there’s an important update for 2025 you’ll want to know about. The IRS has announced an increase in the standard mileage rate for business travel, which could have a direct impact on your tax deductions.

New Mileage Rates for 2025

Starting January 1, 2025, the standard mileage rate for business use of a vehicle will increase to 70 cents per mile — up 3 cents from the 2024 rate. This change means that every mile you drive for business purposes could result in a larger tax deduction. The rates for other types of mileage remain unchanged for 2025:

    • Medical and moving purposes (for qualified active-duty members of the armed forces): 21 cents per mile
    • Charitable purposes: 14 cents per mile (set by statute)

These rates apply to all types of vehicles, including gasoline, diesel, electric, and hybrid-electric vehicles.

Why Does This Matter?

If you’re a business owner or self-employed, this increase could result in higher tax deductions for vehicle expenses. For example, if you drive 10,000 business miles in 2025, your deduction would be $7,000 — up from $6,700 in 2024. While 3 cents per mile may not seem like much, it can add up significantly over the course of a year.

What About Vehicle Depreciation?

For those using the mileage rate to calculate deductions, it’s important to note that the IRS sets a portion of that rate to account for vehicle depreciation. For 2025, the depreciation portion of the rate is 33 cents per mile. This is relevant if you plan to sell your vehicle later, as it affects how much of the vehicle’s value can be written off.

What About Other Methods to Calculate Vehicle Deductions?

While many business owners use the standard mileage rate because of its simplicity, you also have the option to track and deduct actual vehicle expenses. This approach allows you to deduct costs like gas, maintenance, insurance, and depreciation. Depending on how much you drive and how much you spend on vehicle upkeep, one method may result in a larger deduction than the other. We’re happy to help you figure out which method works best for your situation.

FAVR Plan Changes for 2025

If you’re an employer reimbursing employees for business use of their personal vehicles under a Fixed and Variable Rate (FAVR) plan, there’s an important update for you, too. The IRS has set the maximum standard automobile cost at $61,200 for 2025 — a decrease of $800 from 2024. This value also applies to the fleet-average valuation rule and the vehicle cents-per-mile rule.

What Should You Do Next?

    1. Track Your Mileage: Make sure you’re keeping accurate records of your business mileage. Apps and software can simplify this process.
    2. Consider Which Deduction Method is Best: Decide if you’ll use the standard mileage rate or actual vehicle expenses for 2025. We can help you run the numbers.
    3. Talk to Us: If you’re not sure how the rate changes impact your business or employee reimbursements, we’re here to help.

Need help understanding how this change affects your business? Reach out to our team for guidance. We’re here to help you make the most of every mile you drive.

Source: IRS Notice 2025-5

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