What Does the Federal Mileage Rate Cover?
Navigate the federal mileage rate with confidence. Learn its comprehensive purpose and precise parameters for vehicle expense management.
The federal mileage rate provides a simplified method for individuals and businesses to account for vehicle expenses related to specific types of travel. This rate, set annually by the Internal Revenue Service (IRS), allows taxpayers to deduct or be reimbursed for the costs of operating an automobile without needing to track every individual expense. The IRS adjusts these rates yearly to reflect changes in the overall costs of vehicle ownership and operation across the country.
What the Standard Mileage Rate Includes
The standard federal mileage rate is an all-inclusive figure designed to cover a broad range of vehicle operating costs. These include variable expenses such as fuel, oil, and tire wear, which fluctuate based on distance driven. Fixed costs, like vehicle insurance, routine maintenance, and registration fees, are also factored in. Depreciation, representing the decrease in a vehicle’s value over time, is also a component embedded within the business mileage rate.
If the standard mileage rate is utilized, individual costs like gasoline purchases, repair bills, or insurance premiums cannot be separately deducted. For instance, for 2025, the business mileage rate is 70 cents per mile, which accounts for these combined fixed and variable costs.
Expenses Not Included in the Standard Rate
While the standard mileage rate covers most vehicle operating costs, certain expenses are not included and can be deducted or reimbursed separately. These include parking fees and tolls incurred during qualifying travel.
Other expenses deductible separately, especially for business use, include interest on a car loan. State and local personal property taxes paid on the vehicle can also be deducted apart from the standard mileage rate.
Types of Driving Covered by the Rate
The federal mileage rate can be applied to several distinct categories of travel, each with specific criteria. Business mileage is for travel undertaken for work purposes, such as driving to client meetings, visiting temporary work locations, or making deliveries. This category does not include commuting between a home and a regular workplace.
Medical mileage applies to travel for obtaining medical care, including trips to doctor’s offices, hospitals, or pharmacies for prescribed medications. The rate for medical purposes is 21 cents per mile for 2025. Charitable mileage covers travel performed in service of a qualified charitable organization, such as transporting goods for a charity event or volunteering at a distant location. This rate is set by statute and remains at 14 cents per mile for 2025.
Moving mileage is a restricted category, applicable only to qualified active-duty members of the Armed Forces moving due to a permanent change of station. For these individuals, the moving mileage rate is 21 cents per mile in 2025. Most other taxpayers cannot claim a deduction for moving expenses.
Eligibility for Using the Standard Rate
To use the standard mileage rate, individuals must meet certain eligibility requirements. A primary condition is that the taxpayer must own or lease the vehicle for which they are claiming the deduction. It is not permissible to use the standard mileage rate if one operates five or more vehicles simultaneously, as this indicates a fleet operation.
If the actual expense method was used for a vehicle in a prior year, including claiming depreciation using methods like Section 179 or accelerated depreciation, the standard mileage rate cannot be used for that same vehicle in subsequent years. However, if the standard mileage rate was chosen in the first year the vehicle was available for business use, taxpayers can switch between the standard rate and actual expenses in later years. For leased vehicles, if the standard mileage rate is chosen, it must be used for the entire lease period.