The 2024 IRS Mileage Rate for Business

The IRS increased the 2024 business mileage rate for the fourth time in three years. Here's our guide to 2024 tax deduction rules, tax-free reimbursements, and cost considerations for businesses.

What is the 2024 IRS business mileage rate?

The 2024 business mileage rate has increased to 67 cents per mile, an increase of 1.5 cents per mile from the 2023 IRS rate. This modest increase was expected for reasons explained below.

The business mileage rate is not to be confused with the other two standard mileage rates published by the IRS –

the charitable mileage rate ($0.14/mile, unchanged)
rate for medical and moving purposes ($.21/mile, a decrease of 1 cent)

2024 tax deductions for business mileage

When you file your 2024 taxes, you need to know the mileage tax rules. If you received a mileage reimbursement in 2024, that is NOT taxable income. If you want to deduct your business mileage using the 2024 IRS mileage rate, read the rules below.

IRS rules for tax deductions vs. business reimbursements

The federal mileage rate for 2024 gives businesses and individuals a way to estimate tax deductible costs. A mileage rate is an easy way to quantify the value of operating a vehicle. In other words, the federal mileage rates are designed to be tax deduction tools.

However, many organizations use the business rate as a mileage reimbursement for employees. IRS Publication 463 designates the 2024 federal mileage rate as the maximum tax-deductible rate for business reimbursements. Using the IRS mileage rate or a fixed and variable rate (FAVR), employers reimburse tax-free and write off company mileage.

IRS Rate v. FAVR - Calculate Savings

2024 IRS mileage tax rules for employers vs. employees

You cannot deduct business mileage on your 2024 taxes if you incurred the mileage as an employee. Self-employed drivers may use the IRS mileage rate for 2024 to deduct mileage as a business expense on Schedule C.

The IRS mileage rate helps individuals determine the non-taxable value of business vehicle use. The 2018 Tax Cut and Jobs Act eliminated this tax deduction for employees until the tax year 2026. Self-employed workers should use the IRS mileage rate of 67 cents per mile for 2024 and 65.5 cents per mile for 2023.

IRS-approved accounting methods for 2024 mileage reimbursements

Employees may receive a reimbursement tax-free for business mileage. These employees do not pay taxes as long as the mileage rate does not exceed the 2024 IRS mileage rate of $0.67 per mile. But this system requires an IRS-approved method to account for business use.

IRS mileage log requirements

A mileage log is the simplest accounting method for mileage reimbursement using the IRS rate. Drivers report the mileage monthly, and employers calculate a payment by multiplying the mileage by the current business rate.

An approved mileage log must be timely and include the following for each business trip:

date
destination and purpose
miles driven

Other mileage tracking options

Because entering trip information into a log or spreadsheet is tedious, many organizations and self-employed workers use an automated system.

GPS mileage tracking apps are a popular and secure way to accurately record mileage, trip destination, and dates. The best apps allow this process to proceed hands-free while also maintaining privacy for the employee.

How did the IRS calculate federal mileage rates for 2024?

The IRS considers the average costs of vehicle ownership and operation for the previous year combined with the anticipated costs of the coming year. These costs have steadily increased, which is why the rate has continually increased, from 56 cents per mile in 2021 to 67 cents per mile in 2024.

Here are some cost factors used to calculate the rate:

1. Gas prices

During 2022, which gas prices spiked from March through June, the IRS rate was increased mid-year from $0.585/mile to $0.625/mile. Since that time, prices have settled down from their peak at over $5/gallon to an average of $3.30/gallon at the end of 2023. Nonetheless, the IRS mileage rate has remained high due to other cost factors.

2. Vehicle prices and depreciation

The price of a new vehicle averaged $45,332 in November of 2023, a 1.9% decrease from one year earlier but 20% higher than four years ago. A current large inventory is softening prices, but the United Auto Workers strike will likely cause a decrease in inventory in 2024, keeping prices high.

The price of used vehicles remains very high, though it has been decreasing steadily throughout 2023. With used vehicle prices falling now, depreciation may have factored more heavily in the 2024 IRS mileage rate.

3. Auto insurance, repair, maintenance

One of the largest increases in costs to vehicle owners has been insurance premiums. Insurance rates have increased by 19.2% during the past year, which surely affected the IRS mileage rate calculations for 2024. One cause in the increase is the rapid increases in the cost of repairs.

While the cost of body work increased by 3.7%, vehicle repairs in general increased by 15.1% from October 2022 to October 2023. Maintenance and servicing is also up by 6.6% over one year earlier. All in all, it is not only expensive to purchase a vehicle but increasingly expensive to own and maintain a vehicle.

How does the 2024 IRS mileage rate affect business decisions?

With vehicle costs increasing it is not surprising that the IRS rate increased for 2024. For businesses that pay the IRS mileage rate to employees for vehicle reimbursement purposes, this is yet another increase in operating costs. There are reasons to question the IRS mileage rate for vehicle reimbursements, however.

The following articles detail the various shortcomings of using standardized mileage rates for reimbursements:

The best alternative to the IRS rate for mileage reimbursement is the fixed and variable rate approach, also known as FAVR. Learn more here:

IRS Rate v. FAVR - Calculate Savings