What’s New in the 2025 IRS Mileage Rate?
Every year, the IRS adjusts its standard mileage rates to reflect the real-world cost of driving. The IRS mileage rate is expected to increase slightly compared to 2024 due to higher fuel prices, vehicle maintenance costs, and broader inflationary pressure. Understanding how this rate stacks up historically helps individuals and businesses plan smarter and deduct accurately.
Whether you’re self-employed, a business owner, or a gig worker, comparing this year’s rate with previous years gives insight into how much more or less you can expect to deduct per mile in 2025.
IRS Mileage Rate 2025: Projected Breakdown
While the IRS will publish official rates in late 2024, early estimates for 2025 suggest:
The business rate is the most relevant for deductions, reimbursements, and day-to-day tracking. It reflects the total operating cost of using a vehicle for work including fuel, insurance, maintenance, and depreciation.
Side-by-Side Comparison: 2025 vs. Recent Years
|
Tax Year |
Business Rate |
Medical / Moving |
Charitable |
|
2025 (est.) |
67¢ |
21¢ |
14¢ |
|
2024 |
65.5¢ |
22¢ |
14¢ |
|
2023 |
65.5¢ |
22¢ |
14¢ |
|
2022 (Jan–Jun) |
58.5¢ |
18¢ |
14¢ |
|
2022 (Jul–Dec) |
62.5¢ |
22¢ |
14¢ |
As you can see, the business mileage rate has generally increased year over year, especially after the fuel price spikes and inflation seen in 2022 and 2023. The charitable rate, however, remains fixed by federal law and hasn’t changed in over two decades.
What’s Driving the Changes in Mileage Rates?
Fuel Prices
One of the biggest contributors to an increased mileage rate is the national average cost of fuel. Gasoline prices rose sharply in 2022 and have remained elevated in certain regions through 2024. When fuel costs climb, the IRS typically raises the business mileage rate to reflect the added burden.
Vehicle Maintenance and Insurance
Other factors like tire costs, oil changes, registration fees, and car insurance premiums have all gone up. As vehicles become more expensive to own and operate, the mileage rate adjusts to stay aligned with reality.
Vehicle Depreciation
New cars depreciate quickly, and depreciation is one of the largest costs baked into the mileage rate formula. With more people buying and financing expensive vehicles post-pandemic, depreciation rates also influence the standard deduction per mile.
What Does This Mean for Taxpayers in 2025?
The slightly higher 2025 IRS mileage rate translates into larger deductions for those who track and report their business miles properly. Let’s look at an example.
That’s an extra $150 in deductions just from the updated rate. For someone in the 24% tax bracket, that’s a $36 reduction in taxes owed—without driving a single additional mile.
Who Benefits Most from This Rate Increase?
Self-Employed Professionals
Freelancers, real estate agents, consultants, and contractors can deduct business mileage on Schedule C. With the 2025 rate increase, they’ll see even greater benefit—especially those who drive thousands of miles per year.
Delivery and Gig Workers
Those using platforms like Uber, DoorDash, Instacart, or Amazon Flex can often rack up 20,000+ miles annually. At the 2025 rate, that’s a $13,400 deduction—a major way to lower both income and self-employment tax.
Small Business Owners
Business owners who reimburse employees for mileage can do so at the new rate without triggering taxable compensation, streamlining expenses and payroll.
Can I Use a Previous Year’s Rate for 2025 Mileage?
No you must use the IRS mileage rate applicable to the calendar year in which the driving occurred. If a mid-year rate change happens in 2025 (as it did in 2022), you’ll need to apply each rate to the correct date range.
For example:
Your records must clearly show the mileage breakdown across those timeframes.
When Comparing Rates, Keep Your Method Consistent
The IRS offers two ways to deduct vehicle expenses:
If you used the standard rate in prior years, comparing your deductions year-over-year is easy. But if you switch methods, comparisons become more complex.
Also note: if you’ve used the actual expense method and claimed depreciation, you may not be eligible to switch back to the standard rate.
Should You Expect the Mileage Rate to Keep Rising?
That depends on broader economic conditions. If fuel prices stabilize or drop in 2025, future mileage rates may level off. However, ongoing inflation in the automotive industry (repairs, parts, insurance) could keep upward pressure on IRS mileage rates through 2026.
While no one can predict the exact rate changes, tracking industry trends and IRS releases is the best way to stay informed and plan your deductions accurately.
Conclusion
The 2025 IRS mileage rate reflects yet another increase in the cost of driving and offers taxpayers a slightly larger deduction per mile. Whether you’re claiming mileage as a freelancer, reimbursing employees as a business owner, or tracking expenses for rideshare deliveries, understanding how this year compares to past rates helps you forecast deductions and maximize savings.
Be sure to use the correct rate for each trip, maintain accurate logs, and stay informed in case of a mid-year change. Small increases in the mileage rate can lead to real tax savings when applied consistently over thousands of miles.