The Internal Revenue Service (IRS) has announced an increase in the standard mileage rate for business use of a personal vehicle for the 2025 tax year. The rate has been raised by 3 cents per mile, reflecting adjustments for inflation and rising transportation costs. This change directly impacts millions of taxpayers who use their personal vehicles for business-related travel and seek reimbursement or tax deductions.
In this blog, we provide a comprehensive guide to understanding the new 2025 standard mileage rate, how it applies to business travel, eligibility rules, recordkeeping requirements, and how to claim the deduction properly.
What Is the Standard Mileage Rate?
The standard mileage rate is a per-mile allowance set annually by the IRS that taxpayers can use to calculate the deductible costs of operating a personal vehicle for qualifying business, medical, charitable, or moving purposes. It simplifies vehicle expense deductions by providing a flat rate per mile instead of requiring actual cost tracking (such as fuel, maintenance, depreciation, and insurance).
Taxpayers may choose between two methods to deduct vehicle expenses:
- Standard Mileage Rate Method: Multiply the number of business miles driven by the IRS standard rate
- Actual Expense Method: Deduct a percentage of actual vehicle expenses based on business usage
2025 Standard Mileage Rate for Business Use
For the tax year 2025, the IRS has increased the standard mileage rate for business use to 68 cents per mile, up from 65 cents in 2024. This 3-cent hike reflects the rising cost of fuel, vehicle maintenance, and ownership.
This rate applies to self-employed individuals, employees using their own vehicle for work (where not reimbursed), and anyone using a personal vehicle for qualified business-related travel.
Example:
If you drive 10,000 business miles during the 2025 tax year, your deduction using the standard mileage rate would be:
10,000 miles × $0.68 = $6,800 deductible business expense
Who Can Use the Business Standard Mileage Rate?
The standard mileage rate can be used by:
- Self-employed individuals (e.g., freelancers, contractors)
- Business owners who drive for work-related tasks
- Employees who are not reimbursed for mileage and itemize deductions (note: unreimbursed employee business expenses were suspended under the TCJA through 2025)
Note: If you choose the standard mileage rate for the first year a car is used for business, you cannot switch to the actual expense method later if the car is leased.
What Counts as Business Mileage?
Only mileage driven for qualified business purposes is eligible. These include:
- Driving to meet clients or customers
- Traveling between work sites
- Attending business meetings, conferences, or training
- Trips to the bank or post office for business errands
Commuting between your home and regular workplace is not considered business mileage and is therefore not deductible.
Other 2025 Mileage Rates (For Reference)
In addition to the business mileage rate, the IRS also provides mileage rates for other purposes. For 2025:
- Medical or Moving Purposes: 23 cents per mile (unchanged)
- Charitable Purposes: 14 cents per mile (set by statute, unchanged)
The business mileage rate is the highest due to the broader range of costs it aims to reimburse, including depreciation, gas, insurance, maintenance, and registration fees.
Recordkeeping Requirements
To claim the standard mileage deduction, the IRS requires meticulous recordkeeping. Taxpayers must maintain a contemporaneous mileage log that includes:
- Date of each trip
- Purpose of the trip
- Starting point and destination
- Odometer readings or total miles driven
Failure to maintain adequate records can result in the IRS disallowing the deduction in the event of an audit. Many taxpayers now use digital mileage tracking apps to ensure accuracy and compliance.
How to Claim the Business Mileage Deduction
The method for claiming the deduction depends on your filing status and type of work:
- Self-Employed Individuals: Report mileage deductions on Schedule C (Form 1040) under “Car and truck expenses”
- Farmers: Use Schedule F to report transportation costs
- Employees: Currently, cannot deduct unreimbursed business mileage unless in specific professions (e.g., Armed Forces reservists, qualified performing artists)
Be sure to calculate the total number of qualified miles and multiply by the applicable standard rate. Keep your mileage log and receipts in case of audit.
Standard Mileage Rate vs. Actual Expense Method
Choosing between the standard mileage rate and the actual expense method depends on your situation:
| Standard Mileage Rate | Actual Expense Method |
|---|---|
| Simpler to calculate and track | May yield larger deduction in high-cost vehicles |
| Uses flat IRS rate per mile | Requires logging all expenses (fuel, oil, repairs, insurance) |
| Must use in first year if you want to use it in future years | May allow for greater accuracy and larger deduction |
Tips to Maximize Business Mileage Deductions
- Start a mileage log on January 1 each year
- Separate personal and business use clearly
- Use apps like MileIQ, Everlance, or TripLog for automated tracking
- Ensure your business purpose is documented for each trip
- Keep vehicle registration and insurance up to date
Conclusion
The IRS’s increase of the standard mileage rate to 68 cents per mile for business use in 2025 is a positive adjustment for individuals who rely on their personal vehicles for work-related travel. This change acknowledges ongoing increases in vehicle operating costs and offers a more generous deduction to eligible taxpayers.
For self-employed professionals and small business owners, this update offers an opportunity to reduce taxable income and improve year-end savings. However, it also reinforces the importance of diligent recordkeeping and compliance. Consult a tax advisor to determine the best deduction method for your situation, and start logging your 2025 business miles today.
