The IRS mileage rate is more than just a tax figure—it’s a reflection of vehicle costs, economic shifts, and IRS policy. Understanding how this rate has changed over time and what to expect moving forward can help individuals and businesses optimize their deduction strategies. This guide explores the evolution of the mileage rate, how it functions today, and where it may be headed next.

What Is the IRS Mileage Rate and How Is It Determined?

The IRS mileage rate is a standardized deduction that allows taxpayers to claim expenses for driving a personal vehicle for business, medical, moving, or charitable purposes. Rather than tracking each individual expense like gas, maintenance, and insurance, you multiply your total eligible miles by a set rate.

Here’s how the IRS typically determines the rate:

• Fuel prices: One of the most significant inputs, often fluctuating year to year.
• Vehicle maintenance costs: Includes repairs, servicing, tires, and parts.
• Depreciation: Reflects the wear and tear of using your personal vehicle.
• Insurance premiums: Average premiums also factor into total cost of ownership.
• Market conditions: Inflation and economic indicators influence annual adjustments.

The IRS typically reviews these variables in the last quarter of each year and announces the new rates for the upcoming year.

A Look at the Mileage Rate Over Time

Analyzing historical data helps put current rates into perspective and reveals broader economic trends. Let’s walk through a brief timeline of how the mileage rate has evolved:

Here’s how the business mileage rate has changed over the last few years:

• In 2020, the business mileage rate was 57.5 cents per mile.
• In 2021, it dropped slightly to 56 cents per mile.
• By 2022, the rate increased mid-year due to rising gas prices, ending the year at 62.5 cents.
• In 2023, the IRS raised the rate again to 65.5 cents per mile.
• In 2024, it climbed to 66 cents per mile.
• For 2025, the current rate is 67 cents per mile.

This steady upward trend reflects increasing costs for drivers across the country.

Medical and moving mileage rates have remained stable at 22 cents per mile in recent years, while the charitable rate has stayed fixed at 14 cents since it is set by Congress.

Why the Mileage Rate Matters

The mileage rate plays a critical role in helping taxpayers offset vehicle-related expenses. It’s especially useful for:

These groups rely heavily on the rate for accurate deductions:

• Freelancers and self-employed individuals – Business-related driving adds up fast.
• Small business owners – Use the rate to reimburse employees without needing fuel receipts.
• Gig economy workers – Delivery drivers, real estate agents, and mobile service providers can deduct miles.
• Volunteers – Though the rate is lower, charitable driving still qualifies for a write-off.

Claiming the correct mileage rate ensures compliance with the IRS and helps lower taxable income.

How the Rate Affects Tax Deductions Today

If you’re using the 2025 mileage rate to calculate your deductions, here’s what that means:

• Driving 5,000 miles for business results in a $3,350 deduction (5,000 × $0.67).
• If you drive 12,000 miles for business annually, your deduction could reach $8,040.
• For 500 miles of medical-related travel, the deduction would be $110.

These deductions can lead to hundreds or even thousands in tax savings, depending on your income bracket and filing status.

What Could Influence the Mileage Rate in the Future?

The IRS doesn’t set rates arbitrarily—they react to national trends. A few factors that may influence future mileage rates include:

The following external pressures may lead to future increases or adjustments:

• Fluctuations in fuel supply and demand – Any spike in oil prices can prompt mid-year adjustments.
• Technological changes – Electric vehicle (EV) growth might change how vehicle costs are calculated.
• Policy updates – IRS reforms or tax law changes could modify how deductions are structured.
• Insurance market shifts – Premium hikes would affect total driving costs.

Staying informed on these trends will help you plan and adjust accordingly.

Should You Use the Mileage Rate or Actual Expenses?

While the mileage rate offers simplicity, some drivers may benefit more from the actual expense method. Here’s how to evaluate your situation:

Consider these factors when choosing between the two:

• Mileage rate: Best for fuel-efficient vehicles and those who prefer streamlined recordkeeping.
• Actual expenses: Better for vehicles with high operating costs or if you already track fuel, maintenance, and depreciation.

Note: If you lease a vehicle and choose actual expenses in the first year, you must continue with that method throughout the lease.

Final Thoughts

The IRS mileage rate continues to evolve with the economic landscape, offering a standardized, fair way to deduct vehicle-related expenses. By understanding the history, current rate, and future outlook, you can make smarter decisions about how to track mileage and which deduction method suits your situation best.

Whether you’re self-employed, running a business, or volunteering for a cause, the mileage rate gives you a chance to make every mile count.