The IRS updated the Standard Mileage Reimbursement Rates for 2025. These rates serve as a guideline for reimbursing employees for business-related vehicle use, for tracking eligible deductions for medical and charitable purposes, and for reimbursing medical travel under a health FSA.
What is the IRS Standard Mileage Rate for 2025?
For 2025, the IRS has increased the business standard mileage rate by 3 cents per mile. The updated rates, effective January 1, 2025, are as follows:
- 70 cents per mile for business use of a vehicle (up from 67 cents in 2024).
- 21 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces (unchanged from 2024).
- 14 cents per mile driven in service of charitable organizations (unchanged and set by statute).
The rates apply to all vehicle types, including electric, hybrid-electric, gasoline, and diesel-powered vehicles.
Key Changes for 2025
- Increased Business Rate:
The 70-cent business mileage rate reflects rising vehicle operation costs, including fuel, maintenance, and depreciation. - No Changes for Other Uses: Rates for medical, moving, and charitable purposes remain the same as in 2024.
Optional Use of the Standard Mileage Rate
While the standard mileage rate is a popular choice for its simplicity, employers may allow employees the option to calculate the actual costs of operating their vehicle instead. This includes tracking expenses such as gas, maintenance, repairs, and insurance. Choosing between the standard mileage rate and actual costs can depend on which method results in a higher reimbursement or deduction.
Reimbursing Employees for Business Travel
Employers can use the IRS standard mileage rate to reimburse employees who use their personal vehicles for work-related purposes. Common examples include:
- Attending offsite meetings or conferences.
- Running company errands, such as picking up supplies.
Using the standard mileage rate streamlines reimbursement, as it avoids the need for employers to calculate the specific operating costs for each employee’s vehicle. Reimbursements using this rate are also non-taxable for employees.
Medical and Charitable Mileage
Employees and taxpayers may still track mileage for non-business purposes:
Medical Mileage:
- Eligible for trips to and from medical appointments, therapy, or treatment.
- Deductible if medical expenses exceed a certain percentage of adjusted gross income.
- Potentially eligible for reimbursement from a health FSA if properly documented.
Charitable Mileage:
- Applicable to miles driven in service of charitable organizations.
- The rate is fixed at 14 cents per mile by law.
Tips for Employers and Employees
- Accurate Record-Keeping: Employees should maintain a detailed log of miles driven for work, medical, or charitable purposes. This should include the date, destination, purpose of the trip, and total miles driven.
- Simplified Reimbursement: Employers adopting the standard mileage rate provide employees with a straightforward, non-taxable method of reimbursement.
- Flexibility in Calculation: Taxpayers may opt to calculate actual vehicle costs if they believe it will result in higher deductions or reimbursements.
Why It Matters
Mileage reimbursements and deductions ensure employees are fairly compensated for using their personal vehicles for work or eligible personal purposes. The 2025 rate increase acknowledges rising vehicle operation costs and offers a straightforward way to calculate reimbursements. By understanding and utilizing these rates, employers and employees can maintain compliance, improve transparency, and make the most of available tax benefits.
Benefit Allocation Systems (BAS) provides best-in-class, online solutions for: Employee Benefits Enrollment; COBRA; Flexible Spending Accounts (FSAs); Health Reimbursement Accounts (HRAs); Leave of Absence Premium Billing (LOA); Affordable Care Act Record Keeping, Compliance & IRS Reporting (ACA); Group Insurance Premium Billing; Property & Casualty Premium Billing; and Payroll Integration.
MyEnroll360 can Integrate with any insurance carrier for enrollment eligibility management (e.g., Blue Cross, Blue Shield, Aetna, United Health Care, Kaiser, CIGNA and many others), and integrate with any payroll system for enrollment deduction management (e.g., Workday, ADP, Paylocity, PayCor, UKG, and many others).
