As we ring in 2025, it’s time to talk about one of the most common yet misunderstood deductions: the business mileage rate. For 2025, the IRS has updated the standard mileage rate to $0.70 per mile, which is an increase from last year. Whether you’re a sole proprietor or running a corporation, understanding how this rate impacts your taxes is essential to maximizing your savings.
Sole Proprietors: Mileage as a Direct Deduction
If you’re a sole proprietor, the business mileage rate allows you to deduct eligible miles directly on your Schedule C. This means every mile you drive for business purposes—whether it’s meeting clients, picking up supplies, or attending a conference—can lower your taxable income. However, it’s crucial to differentiate between personal and business mileage. Commingling the two can lead to audit headaches and missed deductions.
Additionally, it’s important to note that businesses can either take the standard mileage rate or actual vehicle expenses (such as gas, maintenance, and insurance), but not both for the same vehicle. Choosing the right method depends on your specific situation and vehicle usage.
Tip for Sole Proprietors: Use a mileage tracking app like the QuickBooks Online app to log miles in real-time. This eliminates the guesswork and provides the solid records the IRS requires.
Corporations: Reimbursement and Deductions
For corporations, the process works a little differently. If you’re an employee of your own corporation (even as an owner), the company can reimburse you for business mileage at the IRS rate. This reimbursement is tax-free for you and deductible for the company—a win-win situation.
Without an accountable plan, however, reimbursed amounts could be considered taxable income, adding unnecessary complexity to your tax filings. An accountable plan ensures reimbursements are treated as business expenses rather than income, keeping things clean and compliant.
Tip for Corporations: Set up an accountable plan to handle mileage reimbursements. It’s a straightforward way to keep your books in order while maximizing tax benefits.
Why Good Records Matter
The IRS doesn’t take your word for it when it comes to mileage. Without proper documentation, you risk losing your deduction or reimbursement altogether. Here’s what you need:
Dates: Record the date of each trip.
Purpose: Document the business reason for the trip.
Mileage: Note the starting and ending odometer readings, or use a reliable app.
Destination: Include where you went.
Third Party: If you have your oil-changed by a mechanic or have other work done on your vehicle make sure they put a miles in/miles out on your invoice and keep that with your tax records.
Tools like the QuickBooks Online app can make this process painless. By tracking your mileage as you drive, you’ll have all the details you need at tax time without scrambling through old notes or calendars.
Take Action: Simplify Your Mileage Tracking
Whether you’re a sole proprietor or managing a corporation, the key to leveraging the 2025 business mileage rate is accurate tracking and proper planning. Consider setting up an accountable plan for reimbursements or exploring tools like the QuickBooks Online app for automated mileage logging.
Ready to take the hassle out of mileage tracking and ensure you’re maximizing your deductions? Let’s talk! At JA Swanson Agency, we specialize in helping small businesses like yours navigate tax complexities with ease. Contact us today to get started.
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