When it comes to managing business expenses, vehicle usage is a key area where business owners and self-employed professionals can benefit from IRS deductions. To help simplify the process of claiming vehicle-related expenses, the IRS provides an optional standard mileage rate. For 2025, this rate has increased by 3 cents, bringing it to 70 cents per mile for business use. In this article, we’ll explore what the new standard mileage rate means for businesses, how it compares to previous years, and how you can make the most of it.
What is the Standard Mileage Rate for Business Use?
The standard mileage rate is a per-mile allowance established by the IRS to calculate the deductible costs of operating a vehicle for business purposes. Rather than keeping track of actual expenses such as fuel, maintenance, and insurance, businesses and self-employed individuals can use this rate to determine their deduction.
Using the standard mileage rate simplifies recordkeeping and ensures consistent calculations across various types of vehicles, including gasoline-powered, diesel, hybrid, and fully electric cars. Taxpayers can use this rate for vehicles they own or lease, provided they follow IRS guidelines.
It’s important to note that the standard mileage rate is optional. Taxpayers may choose to calculate their actual expenses instead if they believe it will result in a higher deduction.
Read more: EA vs. CPA – What’s the Difference and Which One Do You Need?
Key Changes in the 2025 Standard Mileage Rate
The 2025 standard mileage rate for business use has been set at 70 cents per mile, reflecting an increase from the 67 cents per mile rate in 2024. This change represents a 3-cent rise, highlighting the IRS’s consideration of increasing vehicle-related costs such as fuel and maintenance.
Here’s a breakdown of the standard mileage rates for various purposes in 2025:
- Business use: 70 cents per mile (up from 67 cents in 2024)
- Medical and moving purposes: 21 cents per mile (unchanged from 2024)
- Charitable purposes: 14 cents per mile (set by statute and unchanged from 2024)
The rate for medical and moving purposes remains steady at 21 cents per mile, while the charitable mileage rate is fixed at 14 cents per mile, as mandated by law.
How to Use the Standard Mileage Rate
If you drive a vehicle for business purposes, you may be eligible to use the standard mileage rate to claim deductions on your tax return. To do so, you’ll need to maintain accurate records, including:
- Mileage Log: Keep a detailed log of miles driven for business purposes. This should include dates, destinations, and the purpose of each trip.
- Start of Year Odometer Reading: Record the vehicle’s odometer reading at the beginning and end of the tax year.
- Business vs. Personal Use: Separate business miles from personal miles, as only business-related mileage is deductible using the standard rate.
Special Rules for Leased Vehicles
If you choose to use the standard mileage rate for a leased vehicle, you must continue using it for the entire lease period, including renewals. Additionally, taxpayers must decide whether to use the standard rate or actual expenses in the first year the vehicle is available for business use. This choice can have long-term implications, so it’s advisable to consult with a tax professional.
FAQs About the 2025 Standard Mileage Rate
Here are answers to some common questions regarding the 2025 mileage rate:
Can I switch between the standard mileage rate and the actual expense calculation?
Yes, but only under certain conditions. You must choose the standard mileage rate in the first year the vehicle is used for business. In subsequent years, you can switch to actual expenses, but once you switch, you cannot revert to the standard rate for that vehicle.
Can I use the standard mileage rate if I lease my vehicle?
Yes, but if you opt for the standard mileage rate, you must use it for the entire duration of the lease, including any renewals.
What expenses are covered under the standard mileage rate?
The standard mileage rate covers all variable and fixed costs of operating a vehicle, including fuel, oil changes, maintenance, depreciation, and insurance.
Are electric vehicles eligible for the standard mileage rate?
Yes, the rate applies to all types of vehicles, including gasoline, diesel, hybrid, and fully electric models.
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Conclusion
The increase in the standard mileage rate for business use in 2025 reflects rising costs and offers an opportunity for businesses to maximize their tax deductions. By opting for the standard mileage rate and maintaining proper records, you can simplify your tax filing process while ensuring you take full advantage of available deductions.
Whether you’re a small business owner or a self-employed professional, staying informed about changes in IRS regulations is crucial. Consider consulting with a tax advisor to determine whether the standard mileage rate or actual expense method is more beneficial for your specific situation.
Need Help with Mileage Tracking or Tax Filing?
If you need assistance with tracking mileage or preparing your taxes, our team of experts is here to help. Contact us today to learn how we can support your business in optimizing tax deductions and staying compliant with IRS guidelines.
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