Starting January 1, 2025, the IRS will implement a new standard mileage rate for business-related car use. This change is in response to rising vehicle operation costs and is intended to compensate for business travel expenses fairly.
The IRS still endorses the fixed and variable rate (FAVR) method as the sole method for mileage reimbursement.
The FAVR method separates the expenses of owning and driving a vehicle, categorizing reimbursements into two categories. This approach ensures that reimbursements remain tax-free under the IRS Revenue Procedure 2010-51, which helps both employers and employees by avoiding additional tax burdens.
Beginning in 2025, the standard mileage rates will be:
– 70 cents per mile for business use, up 3 cents from 2024.
– 21 cents per mile for medical purposes, unchanged from 2024.
– 21 cents per mile for moving purposes for qualified active-duty Armed Forces members, also unchanged from 2024.
These rates are essential for determining the deductible expenses of operating vehicles for various purposes, including business, charitable activities, medical travel, and moving expenses for active-duty military personnel. The rise in the business mileage rate reflects the IRS’s acknowledgment of increasing costs associated with vehicle use.
Staying updated on these changes is crucial for accurate financial planning and compliance with IRS guidelines for both businesses and employees.
