Business Mileage Reimbursement 2025: A complete guide to updated IRS rates, rules, and best practices

What are the IRS mileage reimbursement rates for 2025?

Every year, the IRS publishes federal mileage reimbursement rates. These rates can be used by tax paying individuals to calculate their eligible mileage reimbursement amount that can be submitted for tax deductions. The business mileage rate in 2025 is $0.70 which is the highest in recent times. This highlights the importance of submitting corporate mileage reimbursement claims to increase your savings and profitability.

The following are the mileage reimbursement rates published by the IRS from 2021 to 2025:

You can make use of tools like Zoho Expense's Free IRS Mileage Reimbursement Calculator to easily and accurately calculate your estimated mileage reimbursement eligibility.

Who is eligible for IRS business mileage reimbursement?

The federal mileage reimbursement rates and guidelines published by the IRS every year is applicable to various professionals such as employees who use personal vehicles for business purposes, independent contractors, freelancers, self employed individuals, real estate agents, sales representatives, delivery executives, uber or taxi drivers, healthcare workers and much more.

What qualifies as a business mileage according to the IRS?

According to the Internal Revenue Service (IRS), any travel away from your tax home or regular place of work that is ordinary and necessary for a business and is properly documented with required records is classified as qualified business mileage. If you use your vehicle for activities that are directly connected to your business purposes, then those miles driven can be recorded properly and submitted for reimbursement. For example, driving to client meetings or appointments; traveling between different job sites; picking up or delivering inventory, goods, supplies, or equipment; running daily or common business errands like going to the bank, visiting a post office, and the like would qualify for a reimbursement.
It is important to understand that personal trips or any detours taken to fulfill personal requirements during a business trip will not be considered business mileage and hence will not be eligible for a federal tax deduction claim. For example, if you stop over at the grocery store or decide to pick your child up from school after a client meeting, then only the business portion of the trip will be qualified for the IRS mileage reimbursement claim.

How to record business mileage for IRS reimbursement

To claim mileage reimbursement requests with the IRS, it is important to maintain detailed business travel records. The following are the mileage log requirements as per the 2025 IRS mileage reimbursement guidelines:
--> Date of travel
--> Business purpose
--> Starting and ending locations
--> Total miles driven
--> Odometer readings (preferable)
The IRS accepts mileage records accounted in electronic format for reimbursement claims. It is best to have smart and automatic mileage tracking software that can easily record your drives as business and non-business travel miles automatically and account the same systematically as per the federal regulations established by the IRS.

Which method to choose for calculating IRS mileage reimbursements

There are two different methods to compute IRS reimbursement claims.
--> The Standard Mileage Method
--> The Actual Mileage Method
Here's a detailed overview of the two methods to help you decide which one to use when calculating IRS mileage reimbursements.

What is the Standard Mileage Rate Method and how does it work?

The federal guidelines of IRS mileage reimbursement let the eligible tax payer deduct a fixed amount per mile driven, according to the standard mileage rate method. The updated standard mileage rates are published by the Internal Revenue Service (IRS) every year and are divided into categories such as Self-employed and business, Charities, Medical, and moving expenses for members of the armed force.
To use the standard mileage rate for computing and claiming IRS mileage reimbursements, you must choose this method during the very first year the vehicle is available for use in your business. You can later shift to the actual mileage rate if needed, but cannot shift back to the Standard Mileage Rate method after that.
In case of a leased car, one must use the Standard Mileage Rate method for the entire lease period, including renewals if you opt to use the Standard Mileage Rate method.

What is the Actual Expenses method and how does it work?
The federal guidelines for IRS mileage reimbursement let the eligible tax payer deduct the exact expenses incurred from operating the vehicle for business under the Actual Expenses method. This method includes expenses like gas, repairs, oil, insurance, tires, registration fees, licenses, lease payments, and depreciation.
It is important to know that once you choose this method and claim depreciation on a vehicle, you cannot switch back to the Standard Mileage Rate method. You can shift to the Actual Expenses method from the Standard Mileage Rate method at any time to record and submit your IRS mileage reimbursement claims, but cannot switch back to the Standard Mileage Rate once you start recording your mileage reimbursement claims using the Actual Expenses method.

What is the difference between the Standard Mileage Rate method and the Actual Expense method?
The table below offers a clear comparison between the two methods and can help you choose the right option.

How to choose the method that fits your needs
Consider the following factors before finalizing your IRS mileage reimbursement method:

--> Analyze the value of your vehicles and understand their maintenance costs. If you have an expensive vehicle with high maintenance, then choose the Actual Expense method. Opt for the Standard Mileage Rate method when the value of your vehicle and its maintenance cost is much lower.

--> You can also determine the method of mileage recording for IRS reimbursements by analyzing the business usage of your vehicle. If the vehicle is being extensively used for business purposes, then choose the Actual Expense method and choose the Standard Rate method if the vehicle usage for business purposes is much lower.

--> If you are someone who keeps track of every minute detail of your expenses and records every bill and receipt, then the Actual Expense method is the best option. If you are looking for a method to lower your administrative burden, then the Standard Mileage Rate method will be the most viable option.

Check out the table below for a better understanding of considerations before choosing a mileage tracking method for IRS reimbursements:

Best practices for IRS mileage reimbursement 2025

Getting mileage reimbursement claims right holds high stake from both the employee and employer perspective. The federal regulations in states like California, Illinois, and Massachusetts mandate reimbursements, while the remaining states leave it to employer discretion. 

The IRS has several federal regulations and special requirements regarding reimbursements, which when not met can lead to penalties, costly audits, and denied mileage reimbursements. The following session highlights some of the best practices and guidelines which can be followed by employers, employees, and self-employed individuals to claim their IRS reimbursements effortlessly.

For employers:
--> Establish written policies and implement accountable plans that can be easily followed by employees. Make sure to set clear eligibility criteria that defines which employees are eligible for mileage reimbursement claims.
--> Use current IRS rates as the baseline and create efficient systems to process the reimbursement requests on time. Apply mileage policies consistently across all eligible employees to avoid any sort of discrimination.
--> Make comprehensive mileage logs with detailed records and supporting documents mandatory. Establishing a workflow configuration will also help streamline reviews and approvals.
--> Maintain audit trails of all mileage and vehicle-related expenses with detailed records to avoid any penalties and denied deductions.
--> Leverage the benefits of using an automated mileage tracking and expense management application with GPS mileage tracking features to make the whole complex process a breeze.
--> Monitor and analyze mileage data to prevent any fraud or abuse and detect patterns or trends that can be used to manage the mileage expenses better.

For employees:
--> Keep track of all your drives and distinguish between personal and business trips.
--> Make sure to maintain a detailed record of your trip details with start and end locations, business miles driven, odometer readings, purpose of drive, and the like.
--> Preserve supporting documents such as receipts, meeting details, client confirmations, and similar records that can be used to submit your request for claiming mileage reimbursement.
--> Understand company policies and make sure your trips align with the set policies. Avoid out-of-policy drives to keep the whole process of mileage reimbursement easy.
--> Submit your claims for approval on time to keep track of the process and avoid any penalties for denied reimbursements.
--> Respond to any inquiries promptly to avoid any delay in processing your claims.

For self-employed:
--> Track all your drives carefully and maintain a clear record of total business miles driven with date, time, and starting and ending locations. Since having a distinguished business vehicle is not mandatory for self-employed individuals as per IRS guidelines, it is important to have your personal and business drives well sorted and differentiated from each other.
--> Maintain legitimate supporting documents like receipts, bills, and client calendar records or emails to distinguish between business and personal trips.
--> Use a modern and technologically advanced GPS enabled mileage tracking application to track and record business miles and convert them into mileage expenses.
--> Choose your reimbursement methods well in advance and maintain audit-proof records to support your claims. Even though most self-employed workers find following the standard mileage rates convenient, it is important to analyze both methods and compare your potential reimbursement estimate.