IRS Mileage Reimbursement
Calculate mileage reimbursement using current IRS standard rates.
Formula
Reimbursement = Business Miles Driven × IRS Standard Mileage Rate (2025 rate: $0.70 per mile for business use)
How to Calculate
The IRS standard mileage rate is the simplest method for calculating vehicle expense deductions or reimbursements for business use of a personal vehicle. Simply multiply the number of business miles driven by the current IRS rate. The rate is updated annually (and sometimes mid-year) to reflect changing fuel and vehicle costs.
To use the standard mileage rate, you must own or lease the car and choose this method in the first year the vehicle is used for business. After the first year, you can switch between the standard rate and actual expense methods. You cannot use the standard rate for fleet vehicles (5+ cars) or for vehicles used for hire (taxis, rideshare).
The alternative is the actual expense method, where you track all vehicle costs (gas, insurance, maintenance, depreciation, registration) and multiply by the business-use percentage. This method requires more recordkeeping but may yield a larger deduction for expensive vehicles or those with high maintenance costs. You can calculate both methods and choose the larger deduction.
Worked Example
A sales representative drove 18,500 business miles in 2025.
Standard Mileage Method: Reimbursement: 18,500 miles × $0.70 = $12,950
Actual Expense Method (for comparison): Gas: $4,200 Insurance: $1,800 Maintenance: $1,200 Depreciation: $3,500 Registration & fees: $350 Total vehicle costs: $11,050 Business use: 75% (18,500 of 24,667 total miles) Deduction: $11,050 × 75% = $8,288
In this case, the standard mileage method ($12,950) yields a larger deduction than actual expenses ($8,288).
Why It Matters
Vehicle expenses are one of the most common and largest deductions for small business owners, salespeople, and self-employed professionals. Using the correct method and maintaining proper records can save thousands in taxes. The IRS closely scrutinizes vehicle deductions, making accurate tracking and documentation essential for audit protection.
Practical Tips
- ✓Use a mileage tracking app to automatically log trips—manual logs are tedious and often incomplete.
- ✓Only business miles qualify—commuting from home to your regular workplace does not count.
- ✓Calculate both the standard rate and actual expenses in year one to see which produces a larger deduction.
- ✓Keep a written mileage log with date, destination, business purpose, and miles for every trip—the IRS requires it.
Frequently Asked Questions
What qualifies as business mileage?
Can I use the standard mileage rate if I lease my car?
Do I need receipts for mileage deductions?
Skip the Manual Calculations
FiscalInsights automates your financial calculations, tracks your metrics in real time, and gives you actionable insights to grow your business.
Start Free Trial