In 2025, the standard business mileage rate has increased slightly, reflecting a small rise in the national gas prices. The IRS has announced that the new cents-per-mile rate for business use of a car, van, pickup, or panel truck is 70 cents, up from 67 cents in 2024. This rate applies to gasoline, diesel, electric, and hybrid-electric vehicles.
How the Rates Are Calculated
The 3-cent increase in the rate corresponds to the recent rise in gas prices. As of January 17, 2025, the national average price of regular gas was $3.11 per gallon, up from $3.08 a year ago, according to AAA Fuel Prices. However, the standard mileage rate takes into account all vehicle operating costs, not just gas prices.
The IRS sets the business mileage rate annually based on a study of the fixed and variable costs of operating a vehicle, including fuel, maintenance, repairs, and depreciation. In some cases, if there is a significant change in gas prices, the IRS may adjust the rate midyear.
Standard Rate vs. Actual Expenses
Businesses have the option to deduct actual expenses related to the business use of a vehicle, such as gas, oil, insurance, repairs, licenses, and registration fees. Additionally, businesses can claim a depreciation allowance for the vehicle, although certain limits apply to vehicle depreciation that do not apply to other business assets.
The cents-per-mile rate is convenient for those who prefer not to track actual expenses. By using this method, you don’t need to account for all your vehicle-related costs, but you must still document details like the mileage, date, and destination of each business trip. Businesses that reimburse employees for business use of their personal vehicles commonly use this method. Reimbursement programs can help attract and retain employees who use their personal vehicles frequently for business purposes. This is particularly important because, under current law, employees cannot deduct unreimbursed business mileage on their own tax returns.
However, businesses must follow specific rules when using the cents-per-mile rate for reimbursements. If not followed properly, these reimbursements could be considered taxable wages.
When You Can’t Use the Standard Rate
There are situations where you cannot use the standard mileage rate, such as when you’ve previously claimed deductions for the same vehicle or if the vehicle is new to your business this year and you want to take advantage of first-year depreciation tax breaks.
As you can see, several factors influence whether using the standard mileage rate is the best option for deducting vehicle expenses. If you have questions about tracking and claiming vehicle expenses for 2025 or claiming expenses for 2024, we can help.
See our previous article for more information on the 2025 Standard Mileage rates.
