The Internal Revenue Service (IRS) has announced an increase in the optional standard mileage rate for automobiles used for business purposes. Starting January 1, 2025, the rate will rise by three cents to 70 cents per mile. This change applies to cars, vans, pickups, and panel trucks.
The IRS stated that mileage rates for vehicles used for charitable, medical, or moving purposes will remain unchanged. Specifically, the rates will be 21 cents per mile for medical purposes and moving purposes for qualified active-duty members of the Armed Forces. The rate for charitable organizations is set at 14 cents per mile.
Business owners and self-employed individuals can deduct vehicle use on their income tax returns using these rates. However, due to the 2017 Tax Cuts and Jobs Act, employees cannot deduct unreimbursed business mileage unless they are active-duty military personnel.
The IRS emphasized that using the standard mileage rates is optional. Taxpayers may alternatively calculate actual vehicle costs. For those using a vehicle they own and choosing the standard mileage rate in its first year of business use, they have the option to switch between this method and actual expenses in subsequent years.
For leased vehicles, taxpayers must consistently apply the standard mileage rate throughout the lease term and any renewals.
While the statutory law sets the charitable use mileage rate, an annual study determines the business use rate based on fixed and variable automobile operating costs. The medical and moving purpose rates derive from only variable costs in this study.
The details of these changes are outlined in IRS Notice 2025-5 issued on December 19. The notice also includes information about maximum automobile costs under a fixed-and-variable-rate plan (FAVR) and fair market values of employer-provided automobiles available to employees in 2025.
