What Mileage Reimbursement Covers
A standard mileage rate is a single figure per mile intended to cover the full cost of running a vehicle — not just fuel. It bundles fuel, depreciation, insurance, maintenance, tyres, registration and repairs into one number, so neither employee nor employer has to itemise.
This is why the business rate is several times the pure fuel cost. At 28 mpg and $3.50 a gallon, fuel is about 12.5 cents a mile; the 2025 IRS business rate is 70 cents.
2025 U.S. Standard Mileage Rates
| Purpose | Rate per mile | Who can claim |
|---|---|---|
| Business | $0.70 | Self-employed, and employers reimbursing staff |
| Medical or moving | $0.21 | Medical travel; moving only for active-duty military |
| Charitable | $0.14 | Volunteers driving for a qualified charity |
The business and medical rates are recalculated annually from fuel prices and vehicle cost data. The charitable rate is fixed in statute at 14 cents and has not changed since 1998, which is why it now sits far below the actual cost of driving.
Note that since the 2017 tax reform, employees can no longer deduct unreimbursed business mileage on a federal return. The deduction remains available to the self-employed and to certain categories such as reservists and qualified performing artists.
Standard Rate or Actual Expenses?
U.S. taxpayers may deduct either the standard mileage rate or actual vehicle expenses, but not both.
| Standard mileage | Actual expenses | |
|---|---|---|
| Record keeping | Miles and purpose only | Every receipt, plus business-use percentage |
| Covers | Everything except tolls and parking | Fuel, insurance, repairs, depreciation, lease payments |
| Better for | Efficient, inexpensive, high-mileage vehicles | Expensive vehicles, low mileage, heavy repair costs |
| Switching | Must use the standard rate in the first year to switch later | Choosing actual first with depreciation locks you in |
The rule that catches people: if you claim actual expenses with accelerated depreciation in year one, you cannot switch to the standard rate for that vehicle afterwards. Starting with the standard rate keeps both options open.
What Counts as Business Mileage
- Counts: travel between work locations, visits to clients or customers, trips to temporary work sites, driving to the bank or post office for the business, and travel to business meetings away from your regular workplace.
- Does not count: commuting between home and your regular place of work, however far it is. This is the single most common error.
- Home office exception: if your home is your principal place of business, trips from there to a client are business miles rather than commuting.
Keeping a Compliant Log
The IRS requires a contemporaneous record. Each entry needs:
- Date of the trip
- Starting point and destination
- Business purpose
- Miles driven
Also record the odometer at the start and end of the year. Reconstructing a log after the fact is explicitly disfavoured and is a frequent cause of disallowed deductions on audit.
Annual Reimbursement by Mileage
| Miles per year | At $0.70 | Per month |
|---|---|---|
| 2,000 | $1,400 | $117 |
| 5,000 | $3,500 | $292 |
| 10,000 | $7,000 | $583 |
| 15,000 | $10,500 | $875 |
| 20,000 | $14,000 | $1,167 |
| 30,000 | $21,000 | $1,750 |
Outside the United States
| Country | Approximate rate |
|---|---|
| United Kingdom | 45p per mile for the first 10,000 miles, 25p after |
| Canada | 72¢ per km for the first 5,000 km, 66¢ after |
| Australia | 88¢ per km, capped at 5,000 km per vehicle |
| Ireland | Banded by engine size and annual distance |
Most systems taper the rate above a threshold, on the reasoning that fixed costs such as insurance and depreciation are already recovered in the early miles.
Frequently Asked Questions
Can I claim tolls and parking on top?
Yes. Business-related tolls and parking are deductible in addition to the mileage rate. Parking tickets and fines are not.
Is reimbursement taxable income?
Not if it is paid at or below the standard rate under an accountable plan with proper substantiation. Anything above the standard rate is treated as taxable wages.
Does the rate cover an electric vehicle?
Yes — the standard rate applies regardless of what the vehicle burns. Since electricity is much cheaper per mile, EV drivers usually come out ahead on the standard rate.
Which rate applies to a trip that mixes purposes?
Split the trip. Miles driven for business use the business rate; a personal detour on the same journey is not claimable.