This article details the official IRS mileage rates for 2024 and 2025, explaining who qualifies and the two methods for calculating your deduction. Learn how to choose between the standard mileage rate and the actual expense method to optimize your business's tax savings.
Your guide to 2025 IRS mileage deductions (Image credit: Pexels)
When you use a vehicle for business, the IRS allows you to deduct the associated costs. You have two options for this deduction: the standard mileage rate or the actual expense method. Understanding the differences between them is key to maximizing your tax savings.
This guide will compare both approaches, helping you determine the most beneficial one for your business operations. We'll cover the latest rates, who qualifies, and how to properly calculate and claim your deduction.
The Internal Revenue Service adjusts mileage rates periodically to reflect the changing costs of operating a vehicle. For the 2024 tax year, the business mileage rate is 67 cents per mile. This is an increase of 1.5 cents from the 2023 rate. Looking ahead, the rate for 2025 has risen to 70 cents per mile for business use.
The rates for charitable, medical, and moving purposes have different calculations. Here is a breakdown of the rates across the recent tax years:
*According to the Internal Revenue Service mileage rate guidelines, deductions for moving and medical mileage are only available to active-duty members of the Armed Forces for moves related to a permanent change of station.
Significant changes to tax law have altered who is eligible for this deduction. Before the Tax Cuts and Jobs Act, almost any taxpayer could write off business-related mileage as an itemized deduction. Now, this deduction is exclusively available to self-employed individuals and business owners.
This means that if you operate a business, you can deduct the mileage for your work vehicles. For instance, an LLC with a fleet of delivery trucks can claim the mileage for all of them. Similarly, a sole proprietor running an online store can deduct the miles driven to the post office for shipping customer orders.
It's important to distinguish business travel from your daily commute. The miles driven between your home and your primary place of work are not considered deductible business mileage.
Furthermore, the deduction depends on how the vehicle is used. If a vehicle is used exclusively for business, 100% of its mileage is deductible. If you use a personal vehicle for both work and personal trips, you can only deduct the portion of miles driven specifically for business purposes.
You can calculate your mileage write-off using one of two methods. Each has its own requirements and potential benefits, so it's wise to understand both before choosing.
This is the more straightforward approach. The standard mileage rate allows you to deduct a set amount for each business mile driven. For 2024, this is $0.67 per mile, and for 2025, it will be $0.70 per mile.
This rate is designed to be all-inclusive. It covers not just the cost of fuel but also other vehicle-related expenses like insurance, routine maintenance, and depreciation. Consequently, if you choose this method, you cannot separately deduct these additional costs.
The actual expense method involves tracking and deducting the specific costs associated with your vehicle. This includes a wide range of expenses, such as gasoline, oil changes, new tires, insurance premiums, lease payments, depreciation, parking fees, and tolls.
If the vehicle is used solely for business, you can deduct 100% of these expenses. If it's used for both business and personal travel, you must calculate the business-use percentage. For example, if 20% of your total mileage in a year was for business, you can deduct 20% of your total vehicle expenses.
Keeping detailed records is essential for this method. Manually tracking every receipt for gas, maintenance, and other costs can be a significant administrative task. Automating this process can save time and ensure accuracy. For instance, a service like Zenceipt can connect to your email inbox and automatically pull invoices and receipts for vehicle-related expenses, simplifying the record-keeping required for the actual expense method.
To illustrate with an example: Imagine you drove your truck a total of 10,000 miles in 2024, with 2,000 of those being for business. Your total vehicle-related expenses for the year were $1,200. The calculation would be: (2,000 business miles / 10,000 total miles) x $1,200 total expenses = $240 deduction.
The specific tax form you use to claim your mileage deduction depends on your business's legal structure.
Isabella Chen
Isabella is a copy writer who believes accounting shouldn't be intimidating. She draws on her experience helping small businesses to create content that demystifies bookkeeping and empowers entrepreneurs to manage their finances with confidence.
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