Federal Mileage Reimbursement

Federal Mileage Reimbursement refers to the standard rate set by the IRS that employers or taxpayers can use to reimburse or deduct expenses related to the business use of a personal vehicle. This rate simplifies the process of calculating vehicle-related expenses such as fuel, maintenance, insurance, and depreciation. While the IRS sets the rate, employers are not legally required to reimburse employees—though many do to remain competitive and compliant with best practices.

Key Facts

• IRS-Set Rates for 2025:
  
  • Business Use: $0.70 per mile
  • Medical or Moving (military only): $0.21 per mile
  • Charitable Use: $0.14 per mile (set by statute, not IRS)
• Covers More Than Just Gas: Includes costs like gas, oil, maintenance, tires, insurance, depreciation, and registration - but not parking fees or tolls (those can be deducted separately).
• Used for Tax Deductions and Reimbursements: Employees may be reimbursed by employers tax-free (if at or below the IRS rate). Self-employed individuals can deduct mileage on Schedule C of their tax return.
• Recordkeeping Is Required: You must log date, miles driven, business purpose, and destination to claim a deduction or qualify for reimbursement.
• Not Mandatory for Employers: The IRS sets the maximum non-taxable rate, but employers are not federally required to reimburse - some states (like California and Illinois) may require it.
• Reimbursement Above the Rate Is Taxable: If an employer reimburses more than the IRS rate, the excess may be considered taxable income to the employee.

1. What is the IRS mileage reimbursement rate for 2025?

For business use of a personal vehicle, the 2025 rate is $0.70 per mile.

2. Is mileage reimbursement required by law?

Not federally. However, some states require employers to reimburse workers for necessary job expenses, including mileage.

3. Can I deduct mileage on my taxes?

Yes - self-employed individuals can deduct business mileage. Employees generally cannot deduct unreimbursed mileage unless under specific exceptions (for example, Armed Forces).

4. What documentation is needed to claim mileage?

You need a mileage log that includes:

• Date of the trip
• Starting and ending location
• Number of miles driven
• Purpose of the trip

5. Can an employer pay more than the federal mileage rate?

Yes, but anything above the IRS rate is taxable to the employee unless substantiated with actual expense records.