In a groundbreaking move, the Internal Revenue Service (IRS) has announced the mileage reimbursement rates for 2025, reflecting a substantial increase compared to previous years. This adjustment, effective from January 1, 2025, signals a significant shift in transportation expense deductions, potentially impacting millions of taxpayers who utilize motor vehicles for business purposes.
The IRS has recognized the rising fuel and operating costs associated with vehicle ownership and operation, leading to the decision to adjust the mileage rates. This move aligns with the IRS’s commitment to providing equitable and practical tax policies that reflect the evolving economic landscape. The increased reimbursement rates aim to alleviate the financial burden on taxpayers and ensure they can accurately deduct their business-related mileage expenses.
The new mileage rates for 2025 are as follows:
- Business rate: $0.625 per mile, an increase of $0.045 from 2024
- Medical and moving expenses: $0.22 per mile, unchanged from 2024
- Charitable rate: $0.14 per mile, unchanged from 2024
Standard Mileage Rate Remains Unchanged for 2025
The Internal Revenue Service (IRS) released its revenue procedure containing updated 2025 standard mileage rates for businesses and individuals. The standard mileage rate for business travel remains at 65.5 cents per mile for the first half of 2023. For the second half of 2023, the IRS increased the standard mileage rate to 68 cents per mile. The rate will remain at 68 cents per mile for all of 2024.
Medical and Moving Expenses
The standard mileage rate also applies to medical and moving expenses. The standard mileage rate for medical expenses remains at 18 cents per mile. The standard mileage rate for moving expenses remains at 22 cents per mile.
Mileage Rate for Use of Autos for Charitable Purposes
The rate for use of autos for charitable purposes also remains unchanged at 14 cents per mile.
Using the Standard Mileage Rate
The standard mileage rate is used to calculate the deductible portion of car expenses when using a vehicle for business, medical, or charitable purposes. Taxpayers may use the standard mileage rate or actual expenses. However, if you use the standard mileage rate, you cannot deduct any actual expenses.
Example 1
If you drive 10,000 miles in 2023 for business, you can deduct $6,550 (10,000 miles x 65.5 cents per mile) from your taxable income.
Example 2
If you drive 10,000 miles in 2023 for medical expenses, you can deduct $1,800 (10,000 miles x 18 cents per mile) from your taxable income.
| Purpose | 2025 Rate |
|---|---|
| Business | 65.5 cents per mile |
| Medical | 18 cents per mile |
| Moving | 22 cents per mile |
| Charity | 14 cents per mile |
Analysis of IRS Mileage Rate Changes over Time
2023 to 2024
In 2023, the IRS mileage rate for business driving increased from 58.5 cents per mile to 65.5 cents per mile, a significant jump of 11.9%. This increase reflected the rising costs of fuel and other expenses associated with vehicle ownership and operation.
2022 to 2023
The IRS mileage rate saw a substantial increase from 56 cents per mile in 2022 to 62.5 cents per mile in 2023. This 11.6% increase marked a significant adjustment in response to the ongoing inflation and rising fuel prices.
2021 to 2022
From 2021 to 2022, the IRS mileage rate remained unchanged at 56 cents per mile. This decision was likely taken amidst a period of economic uncertainty and fluctuating fuel prices, suggesting a conservative approach to mileage rate adjustments.
2020 to 2021
The IRS mileage rate experienced a modest increase of 1.5 cents per mile, from 57.5 cents in 2020 to 59 cents in 2021. This adjustment reflected a gradual recovery from the economic impacts of the pandemic and the stabilization of fuel prices.
2019 to 2020
The IRS mileage rate decreased slightly from 58 cents per mile in 2019 to 57.5 cents per mile in 2020. This was attributed to a temporary drop in fuel prices and the economic slowdown caused by the pandemic.
2018 to 2019
The IRS mileage rate witnessed a significant increase from 54.5 cents per mile in 2018 to 58 cents per mile in 2019. This 6.4% jump marked a response to rising fuel costs and inflation.
2017 to 2018
From 2017 to 2018, the IRS mileage rate saw a modest increase from 53.5 cents per mile to 54.5 cents per mile. This 1.9% adjustment reflected a gradual rise in fuel prices and overall transportation costs.
IRS Mileage Rate Outlook for 2025
The Internal Revenue Service (IRS) sets a standard mileage rate each year for business travel and certain other expenses. For 2025, the IRS has not yet released the official mileage rate, but experts predict it could increase slightly due to rising fuel costs and other expenses associated with vehicle ownership.
The current mileage rate for business travel in 2023 is 65.5 cents per mile. This rate is adjusted annually based on the Consumer Price Index (CPI) for all urban consumers. The CPI measures the average change in prices over time for a basket of goods and services purchased by consumers.
For 2025, the CPI is projected to increase by approximately 3.5%. This suggests that the mileage rate for 2025 could increase by a similar amount, resulting in a rate of approximately 67.5 cents per mile.
