Is 60 Cents a Mile a Good Reimbursement Rate?

Using a personal vehicle for business often requires compensation. A fair mileage reimbursement rate is a common financial consideration. A “good” rate is not fixed; it depends on individual circumstances and factors influencing vehicle costs.

Components of Driving Costs

Vehicle operating costs include variable and fixed expenses. Variable costs, like fuel, increase with mileage and are influenced by gas prices and vehicle efficiency. Routine maintenance and consumables are also variable costs.

Fixed costs are incurred regardless of mileage. Depreciation, a significant fixed cost, reflects a vehicle’s value decrease. Other fixed expenses include insurance premiums, annual vehicle registration fees, and financing interest.

Cost components vary by vehicle make, model, age, and driving habits. Newer, luxurious vehicles typically have higher depreciation and maintenance costs. Geographic location also affects fuel prices, insurance rates, and maintenance.

Benchmark Mileage Rates

The Internal Revenue Service (IRS) sets an annual standard mileage rate, a benchmark for calculating deductible vehicle operating costs for business, medical, or moving purposes. For 2025, the business rate is 70 cents per mile. This rate simplifies record-keeping for tax deductions or employee reimbursement.

The IRS calculates this rate based on fixed and variable vehicle costs, including depreciation, insurance, repairs, tires, maintenance, gas, and oil. The rate was 67 cents per mile for 2024 and 65.5 cents per mile for 2023, showing annual adjustments. Many employers adopt the IRS rate for employee reimbursement due to its comprehensive nature.

While the IRS rate is a guideline, some employers or industries use different internal rates based on operational needs or cost analyses. These may not align with IRS figures. However, the IRS rate remains a widely accepted benchmark for business mileage reimbursement across the United States.

Assessing a Mileage Rate

To determine if a 60-cent rate is adequate, calculate your estimated per-mile driving costs. Sum all variable costs, like annual fuel and maintenance. Include fixed costs such as depreciation, insurance, registration, and financing interest. Divide total annual costs by annual mileage for your personalized expense.

Comparing your personal cost per mile to the 60-cent rate offers insight. If your costs exceed 60 cents, you subsidize business driving. If lower, the 60-cent rate provides a surplus, potentially covering other travel expenses. A rate matching personal costs indicates fair reimbursement.

Factors influencing a suitable rate include vehicle make, model, age, and fuel efficiency. Large SUVs typically have higher fuel and maintenance costs. The driving environment also plays a role; frequent city driving can lower fuel economy and increase wear.

Geographic variables like local fuel prices, insurance rates, and maintenance costs directly influence per-mile expenses. High annual mileage can accelerate depreciation and increase maintenance needs. Evaluating these factors provides a comprehensive assessment of whether 60 cents per mile adequately covers unique driving expenditures.

References

1. IRS. “IRS provides tax inflation adjustments for tax year 2024.” [https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2024]
2. IRS. “IRS issues standard mileage rates for 2024.” [https://www.irs.gov/newsroom/irs-issues-standard-mileage-rates-for-2024]
3. IRS. “IRS issues standard mileage rates for 2023.” [https://www.irs.gov/newsroom/irs-issues-standard-mileage-rates-for-2023]