2025 IRS Mileage Rate Update: What Optometry Practice Owners Need to Know
Every January brings a familiar administrative task that many practice owners overlook: updating their mileage reimbursement rates. The IRS has announced the standard mileage rate for 2025 is 70 cents per mile, up from 67 cents in 2024—a 4.5% increase that affects how you reimburse yourself and your team for business driving.
If this sounds like minor administrative housekeeping, consider this: A staff member who drives 200 business miles monthly will receive $84 more annually at the correct 2025 rate versus the outdated 2024 rate. Multiply that across multiple staff members over a full year, and the difference becomes significant—both for your team's compensation and your practice's tax deductions.
More importantly, using incorrect rates creates compliance issues, audit risks, and demonstrates to your team that you're not paying attention to details that affect their paychecks—hardly the message you want to send.
Why the Mileage Rate Matters
The IRS standard mileage rate exists to simplify the reimbursement of vehicle expenses for business use. Instead of tracking actual costs (gas, maintenance, insurance, depreciation), the IRS provides a per-mile rate that approximates the average cost of operating a vehicle.
When you reimburse employees (or yourself) at this rate for legitimate business miles, those reimbursements are:
Tax-free to the recipient (not considered taxable income)
Fully deductible to your practice (reducing your taxable business income)
Administratively simple (just track miles, not receipts for gas, oil changes, etc.)
However, these benefits only apply when you follow IRS rules correctly—which includes using the current year's rate and maintaining proper documentation.
What Qualifies as Business Mileage?
Before we discuss updating your rates, let's clarify what actually counts as reimbursable business mileage in an optometry practice:
Clearly business mileage:
Driving to satellite offices or clinics where you provide care
Bank deposits or other essential business errands
Attending continuing education conferences (after arriving at the destination)
Meeting with vendors, consultants, or business advisors
Picking up supplies, lab orders, or equipment
Driving to professional association meetings
Visiting other practices for business purposes
NOT business mileage:
Commuting from home to your primary practice location (this is personal commuting, not deductible)
Driving from home to your first appointment if it's at your regular practice location
Personal errands mixed with business errands (only the business portion counts)
Driving home for lunch (personal, not business)
Gray areas requiring documentation:
Driving from your regular office to an offsite consultation, then home (the office-to-consultation portion is clearly business; the consultation-to-home portion may be if it's substantially out of your normal route)
Running a personal errand in conjunction with a business errand (you can only claim the business-purpose miles)
When in doubt, document the business purpose clearly. "Drive to bank - business deposit" is much better than simply "Drive to bank" if the IRS ever questions it.
The Three Ways Practices Handle Mileage Reimbursement
Different practice structures handle mileage reimbursement differently. Understanding which method you're using ensures you update the rate correctly:
Method 1: Employee Mileage Reimbursement (Most Common for Staff)
How it works: Staff members track business miles in a mileage log and submit for reimbursement monthly or quarterly. You reimburse them separately from their regular paycheck.
Tax treatment:
Reimbursements at or below the IRS standard rate are non-taxable to employees
Fully deductible as a business expense on your tax return
NOT subject to payroll taxes (FICA, Medicare, unemployment)
Does NOT appear on W-2s if properly documented
What to update: Your expense reimbursement policy, mileage submission form template, and any accounting system settings that calculate reimbursements.
Best practices:
Require contemporaneous mileage logs (tracked in real-time, not reconstructed months later)
Process reimbursements monthly to maintain good records
Use a standard form or app that captures: date, destination, business purpose, miles driven
Keep all mileage logs for at least 3 years (IRS audit period)
Example: Your optician drives to pick up special order frames from a supplier 15 miles away (30 miles round trip). At 70¢/mile, you reimburse $21.00. This $21 reduces your taxable income but doesn't increase their taxable income—a win-win.
Method 2: Accountable Plan Reimbursement (Common for Owner-Employees of S-Corps)
How it works: If you're a practice owner who's structured as an S-Corporation and you pay yourself a W-2 salary, you can reimburse yourself for business mileage through an "accountable plan."
Tax treatment:
Reimbursements are non-taxable to you
Fully deductible as a business expense on your S-Corp tax return
NOT subject to payroll taxes
Does NOT appear on your personal W-2 if properly structured
Requirements for accountable plan:
Must have a formal written policy (doesn't need to be complex, but must exist)
Expenses must have a business connection
Must be substantiated within a reasonable time (typically 60 days)
Any excess reimbursement must be returned within a reasonable time
Documentation must be maintained
What to update: Your written accountable plan policy document, your mileage tracking system, and any accounting processes you use to process reimbursements to yourself.
Common mistake: Many S-Corp owners don't have a formal written accountable plan and just reimburse themselves randomly. This invites IRS scrutiny and potential reclassification of reimbursements as taxable income.
Example: As the practice owner, you drive to a conference 100 miles away (200 miles round trip). Your S-Corp reimburses you $140 (200 × $0.70). This $140 is not taxable income to you personally, and your S-Corp deducts it as a business expense—reducing the overall tax burden.
Method 3: Mileage Allowance Through Payroll (Less Common, Generally Not Recommended)
How it works: Some practices add a fixed "car allowance" to employee paychecks—say, $200/month regardless of miles actually driven.
Tax treatment:
The allowance is fully taxable to the employee as income
Subject to all payroll taxes (FICA, Medicare, unemployment, income tax withholding)
Appears on W-2
Still deductible to the business, but with less benefit because of payroll tax burden
Why this is problematic: The employee pays taxes on money meant to cover business expenses, and you pay employer payroll taxes on it too. Both parties lose compared to proper mileage reimbursement.
When it might make sense: If someone drives extensively and unpredictably for business, and tracking actual miles is impractical. But even then, you should calculate the allowance based on estimated business miles at the IRS rate.
What to update: If you're using this method, consider switching to actual mileage reimbursement instead. It's better for everyone involved.
How to Update Your Mileage Rate: A Step-by-Step Checklist
Now that you understand the why and the what, here's exactly how to implement the 2025 rate change:
Step 1: Update Your Written Policy Document
Find your employee handbook, reimbursement policy, or accountable plan document. Locate the section on mileage reimbursement and update it:
Old language: "The practice reimburses business mileage at the current IRS standard rate of $0.67 per mile."
New language: "The practice reimburses business mileage at the current IRS standard rate, which is $0.70 per mile effective January 1, 2025."
Better yet, use forward-looking language that doesn't require annual updates: "The practice reimburses business mileage at the current IRS standard mileage rate, as published annually by the IRS."
Step 2: Update Internal Forms and Templates
Check everywhere mileage reimbursement might be referenced:
Mileage reimbursement request form (update the rate field or formula)
Expense report templates (update calculation formulas in Excel/Google Sheets)
Accounting software settings (if your system auto-calculates mileage reimbursement)
Staff intranet or employee resources portal
Any training materials or onboarding documents
Step 3: Communicate to Your Team
Send a brief email or mention in your next staff meeting:
"Quick reminder: The IRS has increased the standard mileage rate to 70 cents per mile for 2025, up from 67 cents in 2024. Starting January 1st, all mileage reimbursements will be calculated at the new rate. Please continue tracking your business miles carefully using our mileage log form. Let me know if you have any questions!"
This takes 60 seconds and prevents confusion when people see different reimbursement amounts for the same miles.
Step 4: Update Your Accounting System
If you use QuickBooks, Xero, or another accounting platform:
Update any mileage reimbursement items or formulas
If you have automated expense reports, update the per-mile rate
Run a test reimbursement to ensure it calculates correctly
Document the change in your year-end accounting notes for your CPA
Step 5: Adjust Your Own Reimbursements (If Applicable)
If you're an S-Corp owner reimbursing yourself:
Update any spreadsheets you use to track your business mileage
Ensure your accountable plan policy reflects the new rate
Coordinate with your bookkeeper or CPA if they process your owner reimbursements
Make sure you're tracking miles contemporaneously (IRS requirement)
Common Mistakes to Avoid
Even with the best intentions, practices often make these errors:
Mistake #1: Using the old rate for part of 2025
The new rate is effective January 1, 2025. Don't use 67¢ for January and February just because you forgot to update. Miles driven in 2025 should be reimbursed at 70¢, regardless of when you process the reimbursement.
Mistake #2: Mixing personal and business miles without documentation
If you drive 50 miles in a day but 30 were personal errands, you can only claim 20 business miles. Don't inflate mileage—it's audit bait.
Mistake #3: Failing to maintain contemporaneous records
The IRS requires mileage logs to be kept "contemporaneously"—meaning you track them as you drive, not reconstruct them months later. Use a mileage tracking app or keep a simple log in your car. "I drove about 2,000 business miles this year" doesn't cut it in an audit.
Mistake #4: Reimbursing above the standard rate without justification
You can reimburse at less than 70¢/mile (though your employees won't love it). You can reimburse at exactly 70¢/mile (ideal). You technically can reimburse above 70¢/mile, but amounts above the standard rate become taxable income to the recipient and require payroll tax withholding.
Mistake #5: Not having a written accountable plan if you're an S-Corp owner
If you're reimbursing yourself for mileage through your S-Corp, you need a written accountable plan on file. It can be simple, but it must exist. Without it, the IRS can reclassify your reimbursements as taxable wages.
The Trust Factor
Getting mileage reimbursement right isn't just about compliance and tax optimization. It's about demonstrating to your team that you value their contributions and handle their compensation professionally.
When an employee submits a mileage log and receives accurate, timely reimbursement at the correct rate, it sends a message: "We pay attention. We care about doing things right. We respect your time and expenses."
When reimbursements are delayed, calculated incorrectly, or processed at outdated rates, it sends the opposite message—even if the dollar amounts are small.
Small details matter in how staff perceive your practice's professionalism and their value to the organization.
When to Consult Your CPA
While updating your mileage rate is straightforward, there are scenarios where you should loop in your accountant:
You're establishing an accountable plan for the first time as an S-Corp owner
You have employees who drive extensively (more than 10,000 business miles annually) and you're considering alternative arrangements
You're unsure whether certain driving qualifies as business vs. personal
You're being audited and need to defend your mileage deductions
You want to switch from a car allowance system to proper mileage reimbursement
Your CPA can ensure you're structured optimally for your specific situation.
Take Action This Week
Don't let this slip through the cracks. Block 30 minutes this week to:
✅ Update your written policy with the new 70¢/mile rate
✅ Revise any forms or templates your team uses to submit mileage
✅ Send a brief communication to staff about the rate change
✅ Adjust your accounting system settings or formulas
✅ Review your own mileage tracking if you're an S-Corp owner reimbursing yourself
This small investment of time now prevents confusion, improves compliance, and demonstrates professionalism.
A quick policy update now = no cleanup later.
