Federal Mileage Rate

The Federal Mileage Rate is the standard per-mile reimbursement set annually by the IRS. It's used to calculate tax deductions and employer reimbursements for vehicle use related to business, medical, moving, or charitable purposes. This rate simplifies expense tracking by covering fuel, maintenance, depreciation, and insurance.

Key Facts

• 2025 Rates (effective January 1, 2025):
  
  • Business: $0.70 per mile (up 3¢ from 2024)
  • Medical and Moving (military personnel): $0.21 per mile (unchanged)
  • Charitable: $0.14 per mile (statutory rate)
  • Calculated by IRS based on average vehicle operating costs, including fuel, maintenance, depreciation, and insurance.
• Optional Deduction Method: Taxpayers can either use this standard rate or calculate actual expenses - but must choose the standard rate in the vehicle's first business-use year.
• Employer Reimbursement: While not mandatory, most employers align with IRS rates to reimburse employees for business mileage. Rates above IRS guidelines may be taxable.
• Documentation Required: To claim deductions or reimbursements, taxpayers/employees must keep records of date, distance, and purpose of each trip.
  

1. What is the standard federal mileage rate for 2025?

• Business Use: $0.70/mile
• Medical/Moving: $0.21/mile
• Charitable: $0.14/mile

2. What does this rate cover?

It includes variable and fixed costs - fuel, maintenance, depreciation, insurance, and wear-and-tear. Charitable and medical rates cover variable costs only.

3. Can employers reimburse above the IRS rate?

Yes, but any amount over the IRS rate may count as taxable income for the employee.

4. Do I need to keep records?

Yes - document the date, miles, and purpose of each trip to support deductions or reimbursements .

5. Can I choose actual expenses instead?

Yes. In your first year of using the vehicle for business, you can opt for the standard rate. In following years, you may choose either the standard rate or track actual costs.