Attention drivers, the 2025 standard mileage rates are out. The IRS just announced the increased rates, which are used for determining the deduction for the costs of operating a vehicle for various business, charitable, moving, or medical reasons.

1. What are the new 2025 standard mileage rates?

Starting January 1, 2025, the IRS has announced the following updated standard mileage rates:

• Business miles: 70 cents per mile (up from 67 cents in 2024)
• Medical or moving purposes: 21 cents per mile (unchanged from 2024). Please note, the moving expense deduction is now repealed except for U.S. armed forces members on active duty who move per military orders or a permanent change of station.
• Charitable organizations: 14 cents per mile (no change from 2024).

2. How are the rates calculated?

A lot goes into figuring out the standard mileage rates. The IRS takes into account things like:

• Gas/oil prices- A significant factor, but not the only one!
• Vehicle insurance costs: The rates account for the amount you pay for your car insurance.
• Wear and tear: The depreciation and overall maintenance required for your vehicle.
• Economic conditions: General economic factors also impact the rates.

In other words, the rates are designed to cover more than just what you spend at the pump – they factor in all the other costs that come with keeping your vehicle on the road.

3. Can I deduct my actual vehicle expenses instead of using the standard mileage rate?

Yes, you always have the option to deduct actual vehicle expenses instead of using the standard mileage rate. This includes things like:

• Fuel
• Insurance
• Repairs
• Depreciation

Choosing between the standard mileage rate and actual expenses depends on the specific costs you incur for your vehicle. You may want to calculate both methods to see which provides a higher deduction.

4. What happens to the moving expense deduction?

Starting in 2025, the moving expense deduction is generally repealed. However, U.S. armed forces members on active duty who move due to military orders or a permanent change of station can still claim this deduction.

5. When do the new mileage rates go into effect?

The new mileage rates are effective January 1, 2025.

6. Can I switch between standard mileage rates and actual costs?

Yes, you can switch between using the standard mileage rate and actual costs, but it's important to keep track of which method you used each year. Once you start using the standard mileage rate for a vehicle, you must continue using it for that vehicle unless you switch to actual expenses, and vice versa.