IRS Mileage Reimbursement Guide | 2025

If you drive your personal vehicle for work, mileage reimbursement is the key to recovering those costs or saving on taxes. Whether you’re a freelancer trying to maximize your deductible expenses or an employer looking to fairly compensate staff for business travel, understanding mileage reimbursement is crucial. In this comprehensive guide, we’ll cover everything you need to know – from the latest IRS mileage rates and what trips count as business mileage, to how to log your miles (and why it matters) – so you can ensure every work-related mile is properly tracked and paid for.

What Is Mileage Reimbursement?

Mileage reimbursement is compensation for using your personal vehicle for business purposes. In an employee context, it’s money a company pays an employee to cover the costs of work-related driving. These costs include fuel, maintenance, insurance, depreciation, and other wear-and-tear that come with driving your own car for work.

Employers typically pay a set amount per mile driven for business, using guidelines published by the IRS as a benchmark. Freelancers and self-employed individuals don’t get a paycheck from an employer, but the concept is similar – they can deduct their business mileage expenses on their tax return, which effectively reimburses them by reducing taxable income.

2025 Standard Mileage Reimbursement Rates (U.S.)

Each year, the IRS sets a standard mileage rate that serves as the benchmark for reimbursing vehicle expenses. Many businesses use this rate to reimburse employees, and freelancers use it to calculate their deductible mileage.

For 2025, the IRS mileage rates are:

Business use: 70 cents per mile

Medical or moving (for active-duty military): 21 cents per mile

Charitable service: 14 cents per mile

These rates are designed to cover the average cost of owning and operating a vehicle — fuel, oil, maintenance, insurance, depreciation, and more.

Important for employers: You don’t have to use the IRS rate, but it’s the safest choice. Reimbursing at or below the standard rate keeps reimbursements non-taxable. If you reimburse above the rate, the excess may be treated as taxable income.

Important for freelancers: Each business mile driven reduces your taxable income by 70¢. Drive 1,000 miles? That’s a $700 deduction. Small trips add up quickly, so logging every business mile matters.

Which Trips Qualify for Mileage Reimbursement?

Not every drive qualifies. To avoid mistakes, it’s critical to know what the IRS defines as business mileage:

✅ Eligible trips include:

• Driving between different work locations in the same day.
• Visiting clients, customers, or vendors.
• Traveling to off-site meetings, conferences, or training.
• Running work-related errands (bank, post office, supply store).
• Going from a home office to a client site or temporary workplace.

❌ Non-eligible trips:

• Your daily commute from home to your regular office.
• Personal errands (even if you stop at a business location along the way).
• Trips not directly tied to business activity.

Mileage Reimbursement for Employers and Employees

For employees, mileage reimbursement is often the difference between feeling supported at work and feeling like they’re paying out of pocket to do their job. When an employee uses their personal car for business purposes—whether it’s visiting a client, traveling to a job site, or running company errands—the employer has the choice of reimbursing them for the miles driven.

At the federal level, there is no law requiring companies to provide mileage reimbursement. That said, some states do impose obligations on employers. California, Illinois, and Massachusetts, for instance, have statutes requiring businesses to cover the necessary expenses their employees incur while working, and that includes mileage. Even in states without specific requirements, most employers choose to reimburse, not only to remain competitive but also to avoid potential compliance issues with wage laws. If an employee’s out-of-pocket travel costs drag their effective pay below minimum wage, employers may be forced to step in.

The IRS mileage rate serves as the most widely accepted standard. By reimbursing at this rate—or less—companies keep payments non-taxable and straightforward. Anything higher than the IRS guideline may be treated as taxable income, which adds unnecessary complexity. The process itself is simple: employees track their business miles, usually in a log or app, submit them at the end of a pay period, and are reimbursed through payroll. Clear policies and prompt reimbursements not only build trust but also ensure the company remains compliant and employees feel fairly treated.

Mileage Deductions for Freelancers and Self-Employed

For freelancers and independent contractors, mileage reimbursement doesn’t come in the form of a paycheck. Instead, it’s handled at tax time through deductions. When you drive your own vehicle for business purposes—whether to meet a client, attend an event, or pick up supplies—you can deduct the costs associated with those miles from your taxable income.

The IRS offers two ways to do this. The most common is the standard mileage method, where you multiply your total business miles by the IRS mileage rate for the year. It’s simple and often generous enough to cover expenses without the hassle of tracking every gas receipt. The alternative is the actual expense method, where you calculate the precise costs of running your car—fuel, maintenance, insurance, even depreciation—and then deduct the percentage that reflects your business use. While this method can sometimes provide a larger deduction, it requires diligent recordkeeping and receipts.

Whichever approach you take, keeping a reliable mileage log is critical. The IRS expects contemporaneous records that clearly state when you drove, where you went, why the trip was business-related, and how many miles you traveled. Without this documentation, you could lose the deduction altogether if you’re ever audited. For many freelancers, these deductions add up to thousands of dollars a year in savings—real money that makes a difference in profitability.