IRS Sets 2025 Mileage Rates and Vehicle Limits
The IRS 2025 mileage rates establish new deduction amounts for business, medical, and charitable driving. For 2025, the rate is 70 cents per business mile, with updated limits for depreciation and vehicle valuation under IRS Notice 2025-5. These changes affect how individuals, self-employed workers, and employers calculate deductible car expenses.
The Internal Revenue Service has released Notice 2025-5, establishing the standard mileage rates and related automobile-valuation limits that take effect for the 2025 tax year. These figures determine the deductible amounts taxpayers may claim when using the IRS’s standard mileage method and affect several employer valuation rules.
Key points are:
Standard mileage rates for 2025
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Business use: $0.70 per mile.
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Medical and moving (qualified): $0.21 per mile.
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Charitable service: $0.14 per mile.
Taxpayers who opt for the standard mileage allowance multiply business, medical, moving, or charitable miles driven by the applicable rate to compute their deductible amount. For many taxpayers this is a simpler alternative to tracking and prorating actual vehicle expenses.
Depreciation component
A portion of the business mileage rate is treated as the depreciation allowance for the vehicle. For 2025, that depreciation component is $0.33 per mile. When the standard business mileage rate is used, taxpayers must follow the related rules for basis reduction and depreciation.
To understand which method gives you the best deduction, see our article “Standard Mileage vs Actual Expenses 2025.”
Vehicle cost and valuation caps
Several employer-related rules use a maximum vehicle value. For 2025 the IRS set that cap at $61,200 for automobiles (including trucks and vans). This limit applies to fixed-and-variable rate (FAVR) plans and certain employer-provided vehicle valuation calculations.
Self-employed drivers can also explore “Tax Deductions for Self-Employed Drivers 2025.”
Effective date
The new rates and limits apply to expenses and reimbursements incurred on or after January 1, 2025. They also govern employer valuation rules for vehicles first made available to employees on or after that date.
For detailed guidance on depreciation and deduction limits, read “IRS Business Expense Rules 2025.”
Practical implications
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For taxpayers who drive frequently for business, the $0.70 business rate may simplify recordkeeping while providing a clear per-mile measure for deductions.
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Volunteers and nonprofit organizations should note the charitable rate remains $0.14 per mile for reimbursing volunteers.
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Employers that operate vehicle reimbursement programs or that provide personal use of vehicles to employees should review plan designs and valuation procedures in light of the $61,200 cap.
Recordkeeping reminder
Regardless of the method chosen, taxpayers should keep contemporaneous records documenting miles driven, the dates, destinations, and purpose of each trip. Good records support claims and make it straightforward to switch between the standard mileage method and actual expense method when needed.
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