What the 2025 IRS Mileage Rate Means for Small Businesses (and How to Prepare for 2026)
As 2025 draws to a close, many small business owners are already thinking ahead to tax time and the new year. One important piece of that planning is how vehicle mileage deductions are handled. The IRS increased the standard business mileage rate to 70 cents per mile in 2025, and understanding that change is key to maximizing your deductions, staying compliant, and setting up your systems for success in 2026.
This article will help you:
Understand the 2025 mileage rate and its implications
Apply best practices for recordkeeping and compliance
Use these insights to prepare smartly for 2026
The 2025 IRS Mileage Rate: What Changed (and What Stayed the Same)
The IRS sets standard mileage rates annually, and for 2025, the business rate increased to 70¢ per mile. This reflects rising vehicle costs, insurance, and fuel. The other rates remain:
Medical / Moving (for military) : 21¢ per mile
Charitable : 14¢ per mile
This change is not brand new by 2026, but it’s the baseline you should use when reconciling deductions and preparing tax returns. If you’ve been tracking mileage under the old rate or using inconsistent methods, now is the time to update your approach.
Why This Matters for Small Business Owners
That extra few cents per mile adds up quickly, especially for businesses that rely on frequent travel. Here’s how:
Greater deductible value: Driving 20,000 business miles in 2025 yields a $14,000 deduction (versus $13,400 under 67¢).
More accurate expense forecasting: Using the correct rate ensures you’re not underestimating costs.
Fair reimbursement policies: If your business reimburses employees for mileage, aligning with the IRS rate keeps reimbursements non-taxable and equitable.
Because this rate increase occurred in 2025, part of your 2025 tax planning and your 2026 systems should reflect it. But be careful not to treat it as brand new, it’s now the standard.
Tips for Recordkeeping & Compliance Heading Into 2026
With the correct rate in mind, here are steps you can take now to ensure your mileage deductions remain solid and audit-resistant.
1. Use a Reliable Tracking Method
Choose a method that works for you (app, spreadsheet, or manual log), and use it consistently. For each trip, record:
Date
Start and end points
Business purpose
Miles driven
Avoid hunting for old trips or estimating, that weakens your record.
2. Segment Business vs Personal Use
Never mix personal and business trips. That distinction should be clear in your log. If a trip includes both, break it into separate entries. This clarity is especially important when you use a standard mileage deduction.
3. Save Year-End Summaries
At tax time, generate a digital or printed report summarizing all your business miles for the year. Store this along with your receipts, vehicle maintenance logs, and any related documentation. That report will be your key backup if ever questioned.
4. Review Your Reimbursement Policy
If your business reimburses employees for using personal vehicles, check your policy. Make sure reimbursement rates for 2025 matched or stayed below the IRS’s 70¢ threshold, because any excess could be taxable. Aligning your policy with IRS rates limits risk and simplifies payroll.
5. Evaluate Standard Rate vs Actual Expense Method
The standard mileage method is simple, but sometimes the actual expense method yields a higher deduction (if vehicle expenses exceed what the standard rate gives you). As you plan for 2026, compare both methods:
Standard method is easier and predictable
Actual expense method may require tracking all costs (fuel, depreciation, insurance, repairs) but can yield more in certain cases
Switching methods has rules, so consult a tax advisor before you make a change.
Using 2025 as a Training Ground for 2026
Now is the time to treat 2025 as your training ground. Build habits and systems that will carry you forward. Use what you’ve learned about recordkeeping and tracking to reduce last-minute scrambling in 2026.
Adjust your accounting software to reflect 70¢ as the default business rate
Train employees or team members on consistent mileage logging
Periodically audit your logs to catch errors early
Review whether your trips are staying within business purposes or creeping into personal territory
By the time 2026 is underway, these habits will feel automatic and your bookkeeping will be cleaner, faster, and more defensible.
Final Thoughts
The mileage rate change to 70 cents per mile for 2025 is now baked into the landscape of small business expense deductions. As you finalize end-of-year reports and set your systems for 2026, take time to adopt strong tracking practices, align your reimbursement policies, and use what you’ve learned to make next year smoother.
This rate increase may not feel dramatic, but it reflects real cost shifts that impact deductions. Treat it not as a surprise but as a signal to refine your systems, stay compliant, and let your bookkeeping work for you, not against you.
