A new year will mean a new, slightly higher standard mileage rate for 2025.
The Internal Revenue Service announced Thursday that the standard mileage rate for 2025 would increase by 3 cents per mile to 70 cents for the optional mileage rate for automobiles driven for business.
That’s an increase from 67 cents per mile in 2024. The new rate takes effect Jan. 1 and would apply to 2025 tax returns filed in 2026.
The IRS standard mileage rate is a key benchmark used by the federal government and many businesses to reimburse their employees for personal mileage expenses.
The rates apply to fully electric and hybrid automobiles, as well as gasoline and diesel vehicles.
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If you work for a company that does not currently reimburse your mileage, be aware that you cannot use the IRS standard mileage rate to claim an itemized deduction for unreimbursed employee travel expenses. This change occurred as part of the Tax Cuts and Jobs Act of 2017, which remains in effect until 2025. If you work for an employer that does not reimburse your travel miles, you have no luck.
Other mileage rates will not increase in 2025.
The standard mileage rate for medical purposes remains at 21 cents per mile in 2025, as in 2024.
The same rate of 21 cents per mile will apply in 2025 for purposes of moving qualified active-duty members of the armed forces, also unchanged from last year.
The kilometer rate used when traveling for charitable associations will remain at 14 cents in 2025. This rate is set by law and will remain unchanged.
Certainly, many drivers do not claim the mileage deduction on their federal tax return. Companies that reimburse their employees for business mileage often follow the IRS mileage rate, but the employee does not claim a deduction if reimbursed.
Taxpayers should keep in mind that getting tax relief for claiming mileage is also not as simple as it used to be.
Taxpayers cannot deduct mileage for their regular moving expenses under the Tax Cuts and Jobs Act.
Self-employed people can deduct business mileage on their tax return. Those filing 2024 returns in 2025 should keep in mind that they will use the 2024 rate for those returns, not the new IRS mileage rate for 2025.
A self-employed taxpayer who files a Schedule C can use the standard rate to deduct expenses related to mileage incurred in carrying out their activities. You can only use one method – the standard mileage rate or the business portion of actual expenses – for the same vehicle.
The IRS rate reflects the cost of filling up your tank, as well as other expenses associated with business driving. The IRS notes: “The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The medical and moving rate is based on variable costs. »
Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X (Twitter) @torpor.