2025 Mileage Rates

When to use the 2025 mileage rate?

If you were self-employed or ran a business last year, use the 2025 mileage rates when claiming tax deductions. In the US, people file the previous year's taxes in the new year, so even though the calendar says 2026, you'll need to use last year's rates to file your tax return by April 15.

Using 2025 mileage rates as an employer or employee

As an employer, mileage rates inform you how much you can reimburse employees for using their vehicles for work-related travel without them having to pay income tax. This includes attending business meetings, delegations, conference trips, and anything work-related except daily trips from home to work.

If you reimbursed employees for work travel last year at or below the 2025 mileage rate (70 cents/mile), these reimbursements should be tax free.

Employees (workers on a W-2) can't claim business mileage deductions on their taxes.

Using 2025 mileage rates as a self-employed person

As a self-employed individual, you can use standard mileage rates to calculate tax deductions for business use of your vehicle. This includes all sorts of client meetings, site visits, or any travel directly related to your business activities. It's a crucial process for many contractors as it helps decrease tax liability while staying compliant with the IRS.

How does the IRS set mileage rates?

Mileage rates are meant to offset the actual costs of vehicle use accurately. Each year, the IRS issues new rates after analyzing various economic factors and the dynamically changing costs of car use and maintenance, such as:

• Cost of fuel
• Inflation
• Vehicle depreciation
• Costs of maintenance and repairs
• Government policies
• Cost of Insurance
• And more

The Internal Revenue Service (IRS) engages an independent contractor to conduct an annual analysis of the abovementioned factors, forming the basis for the standard mileage rate. The goal is to maintain fairness in compensation, accurately represent the costs of using personal vehicles, and ensure compliance with relevant economic and regulatory conditions.

Historical mileage rates

In a typical year, mileage rates only change once, and the rates are announced in Dec for the upcoming year.

However, on a few occasions, the circumstances were so drastic that a change was implemented twice a year instead of a traditional yearly change.

The most notable examples include the fuel price spike in 2008 when the business mileage rate grew from 50.5 cents per mile to 58.5 mid-year and the most recent pandemic-related impact in 2022 (a change of over 4 cents per mile).

While the rates have varied over time, the principle of the IRS mileage rate — offering a standard, fair reimbursement rate that reflects the actual costs of operating a vehicle for designated purposes — remains constant.

How to calculate your mileage reimbursement

Using the standard mileage rates to figure out your deduction is fairly simple:

Tax deduction = current mileage rate x miles driven

This formula can be used to calculate business, medical, and charitable mileage deductions.

For example, if you've driven a total of 1,000 miles for business purposes, you multiply it by the mileage rate for that tax year (70 cents per mile in 2025):

1,000 x 0.70 = $700

The $700 in this case is your business mileage deduction.

The challenging part is mileage tracking and recordkeeping. Each business mile driven for business or another deductible purpose has to be recorded and categorized. It requires both businesses and self-employed people to keep manual logs or use a digital mileage tracking tool like MileIQ to properly track and report mileage.