
The IRS on Dec.19 stated that the optional standard mileage rate for automobiles that are driven for business will increase by 3 cents next year. Meanwhile, the mileage rates for vehicles utilized for other purposes will stay the same as 2024.
Optional standard milage rates are utilized to calculate the deductible costs for operating vehicles that are used for business, charitable and medical purposes. It is also meant for vehicles of active-duty members of the Armed Forces who are moving.
According to the IRS, starting Jan. 1, 2025, the standard mileage rates for the use of a car, van, pickup or panel truck will be:
• 21 cents per mile driven for medical purposes, the same as in 2024.
• 21 cents per mile driven for moving purposes for qualified active-duty members of the Armed Forces, unchanged from last year.
• 14 cents per mile driven in service of charitable organizations, equal to the rate in 2024.
The agency said that the rates apply to fully-electric and hybrid automobiles, as well as gasoline and diesel-powered vehicles.
Although the mileage rate for charitable utilization is set by statute, the IRS clarified that the mileage rate for business use is based on a yearly study of the fixed and variable costs of operating an automobile. Meanwhile, the rate for medical and moving purposes is based on only the variable costs from the annual study.
According to the Tax Cuts and Jobs Act, taxpayers are not permitted to claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Additionally, only taxpayers who are members of the military on active duty may claim a deduction for moving expenses incurred while relocating under orders to a permanent change of station.
Use of the standard mileage rates is optional. Taxpayers may instead choose to calculate the actual costs of using their vehicle.
Taxpayers utilizing the standard mileage rate for a vehicle they own and use for business should elect to use the rate in the first year the automobile is available for business use. Subsequently, in later years, they can then choose to utilize the standard mileage rate or actual expenses, the IRS said
For a leased vehicle, taxpayers utilizing the standard mileage rate should employ that method for the entire lease period, including renewals.
Notice 2025-5 contains the optional 2025 standard mileage rate and the maximum automobile cost utilized to calculate mileage reimbursement allowances under a fixed-and variable rate or FAVR plan. The notice also gives the maximum fair market value of employer-provided automobiles that were first made available to employees for personal use in 2025 for which employers can calculate mileage allowances utilizing a cents-per-mile valuation rule or the fleet-average-valuation rule.