At the end of each calendar year, the Internal Revenue Service (IRS) sets the standard mileage rate for the upcoming tax year, and it’s almost that time again! The last few years have seen a significant jump in the rate, with the IRS increasing its standard mileage rate every year since 2021—and even a midyear rate hike in 2022. Even after gas prices began to stabilize in 2023, the rate still rose; the 2024 standard mileage rate is 67 cents per mile, a full 11 cents higher than the 56 cents per mile it was in 2021 (which, coincidentally, was also the last time the rate went down, from 2020’s 57.5 cents). 

So will this trend continue into the new year? Will the standard mileage rate continue to rise in 2025? 

How Does the IRS Set the Standard Mileage Rate?

Every year, the IRS sets the standard mileage rate for the upcoming tax year by analyzing the costs of owning and operating a vehicle in the US. According to a CompanyMileage analysis, while gas prices obviously impact costs of owning a vehicle, accounting for about 30% of overall cost, the biggest factor we found in our cost analysis was vehicle depreciation, which accounts for about 45%. Insurance represented about 12% of costs, licenses, registration and taxes for 7%; and tires and maintenance another 3% each.

So what will these factors look like next year?

Top 3 Factors Impacting the 2025 IRS Rate 

Fuel Costs

While the cost of gas isn’t the be-all-end-all for predicting the mileage rate, Fuel cost forecasts usually (but not always) have a tendency to reflect whether the mileage rate will rise or fall. The average price of gas has lowered steadily since the highs of 2022, and the US Energy Information Administration (EIA) predicts that this trend will continue into next year, with an average price of gas in the US at $3.20 per gallon, down from 2024’s $3.30. The EIA also projects that in 2025 crude oil prices will also continue on a downward trend, at about $78 per barrel, down from 2024’s $81/barrel. However, these projections cannot completely account for the ongoing war in the Middle East, which may cause oil supply disruptions and ensuing hikes in the price of crude oil. 

Insurance 

Car insurance costs have spiked and continued to stay high in the last year, due to increases in car thefts, road accidents, and lingering employment shortages and supply chain issues in the auto industry. These factors lead to more expensive overall auto repair bills in 2024, and these cost increases led to insurance companies raising their premiums accordingly. Will this trend continue into next year? 

Survey says…probably. High insurance costs have been one of the main drivers of inflation in 2024, and insurance costs are projected to spike severely in several states—especially California, Missouri and Minnesota—where rates are expected to increase by over 50%. With the factors that pushed prices higher in 2024 still not abating completely, experts predict that auto insurance prices could rise by an average of 7-10% in 2025.

Vehicle Costs

The good news is that the cost of buying a new car isn’t projected to get much higher next year. Although we’re not likely to see a significant drop in the vehicular price hikes that have persisted since the onset of the COVID-19 pandemic in 2020, experts predict that car costs should soften next year. As 2025 models start to enter the market, Kelly Blue Book also predicts a better market for buyers next year, with a bump in vehicle buying incentives meant to help ease the pressure on customers’ wallets as prices remain high. 

What Do We Predict?

With 2024’s rate reaching a record high, surpassing 2023’s previous peak, we anticipate a stabilization in the coming year. Although we don’t foresee a significant drop—given the continued high costs of insurance and the potential for fuel prices to fluctuate due to global factors—we do expect the rate to hold steady, similar to the cost of new vehicles. It may even decrease slightly from 2024’s rate, but likely by no more than a cent.

Mileage Reimbursement Made Simple With CompanyMileage

Whether the IRS mileage rate rises or falls, CompanyMileage will always provide the most accurate, efficient, and cost-effective way to reimburse your mobile employees for their work-related travel.

SureMileage, our mileage reimbursement software, uses a unique point-to-point method to calculate the distance between each trip’s start and end points—keeping personal detours, errands, and inflated mileage estimates out of trip logs.

Employees only need a few minutes at the end of each day to organize and submit their trips from their smartphones. Once submitted, expense reports flow through a customizable, automated approval workflow. Upon approval, our software integrates with all major accounting and payroll systems to ensure payments are issued seamlessly.

No matter what the IRS sets for standard mileage rate, CompanyMileage is ready to help you make the most of it. To learn more, contact us for a demo today!