How The 2025 Mileage Rate Hike Affects International Supply Chain Expenses

The increase in the IRS mileage rate for business use in 2025 marks a significant shift in operational costs for many organizations. As the mileage rate hike affects international supply chain expenses, the impact goes beyond domestic travel and logistics, influencing global operations that rely heavily on U.S.-based transportation networks. Many international supply chains depend on domestic freight movement, making them particularly sensitive to rising mileage costs. The rate has risen to 70 cents per mile, a 4.5% increase from the previous year’s 67 cents per mile, according to IRS Notice 2025-05 via Grant Thornton. This hike is not just a numerical adjustment; it reflects broader economic trends and mounting cost pressures across multiple sectors. Many professionals use mileage tracking app to streamline their workflow, ensuring accurate reimbursements and efficient cost management in light of these changes.

Understanding the IRS Mileage Rate

The IRS standard mileage rate is calculated based on an annual study of fixed and variable automotive operating costs. This includes expenses such as fuel, maintenance, and depreciation. For 2025, 33 cents of the mileage rate is attributable to depreciation, up from 30 cents in 2024, as reported by KPMG via IRS Notice 2025-5. This adjustment highlights the growing impact of vehicle depreciation on overall transportation costs.

This rate applies across various vehicle types, including electric, hybrid, gasoline, and diesel vehicles. By setting a standard rate, the IRS provides a simplified method for businesses to reimburse employees who use their personal vehicles for work-related travel. However, this standardization means that changes in the rate can have widespread effects on any sector relying heavily on vehicle use. For instance, sectors like sales, field services, and delivery services, which frequently involve employee travel, face significant budgetary implications due to these adjustments.

Implications for Domestic Business Operations

The increase in mileage rates directly impacts businesses that depend on reimbursing employees for vehicle use. Zachary Zulauf from Cardata points out that this 4.5% rise affects how companies calculate travel expenses, necessitating adjustments in budgeting and forecasting for departments reliant on travel. For a business with numerous employees logging significant miles annually, these costs can accumulate quickly.

Consider a company with 1,000 employees each driving 20,000 business miles per year. With the new rate of 70 cents per mile, this results in an additional $600 per employee per year, or an extra $600,000 for the company as a whole. This illustrates why businesses must reassess their budgets and consider implementing more efficient mileage tracking systems to manage these increased costs effectively. For smaller businesses, even a marginal increase in such expenses can lead to tighter profit margins and necessitate strategic cost-cutting measures elsewhere.

Mileage Rate and International Supply Chains

While the IRS mileage rate primarily affects U.S.-based operations, its ripple effects can influence international supply chains. Domestic transportation often forms a critical link in global logistics networks, particularly in freight and drayage services at ports. As such, increases in domestic transport costs can indirectly raise expenses for international shipping operations.

For instance, U.S. Ports handled 1.6 billion metric tons of waterborne foreign trade in 2022, according to the U.S. Army Corps of Engineers. Each container or ton typically involves domestic trucking or rail drayage. Therefore, any increase in per-mile costs due to mileage rate hikes inevitably contributes to higher costs for international shipments requiring last-mile delivery within the U.S. This is particularly pertinent for industries that rely heavily on just-in-time delivery models, where even slight delays or cost increases can disrupt entire supply chains.

The Broader Economic Context

The mileage rate hike occurs amidst broader economic pressures. Transportation accounts for about 37% of global CO₂ emissions from end-use sectors, as reported by the International Energy Agency. Road freight alone contributes approximately 8% of total global CO₂ emissions. These environmental considerations add another layer of complexity to cost management in logistics.

Fuel prices are a significant component of transportation costs and have a direct correlation with mileage rates. According to the U.S. Energy Information Administration, the average on-highway diesel price was $4.20 per gallon in 2023. Fuel accounted for about 24% of the total marginal cost per mile for U.S. Motor carriers in 2022, underscoring how fluctuations in fuel prices can drive changes in IRS mileage rates. This interplay between fuel prices and mileage rates suggests that businesses must adopt strategies not just for immediate cost management but also for longer-term sustainability and stability.

Managing Increased Costs

To manage these rising expenses effectively, organizations need to adopt strategies that mitigate the impact of increased reimbursement rates. One approach is optimizing routes to reduce unnecessary miles driven and utilizing digital tools to track mileage accurately. This optimization can involve the use of advanced analytics to predict the most efficient routes based on traffic patterns and delivery schedules.

The use of technology such as a mileage tracking app can provide real-time insights into travel patterns and help streamline reimbursement processes. Such tools not only ensure compliance with IRS regulations but also enhance transparency and efficiency in expense management. By using these technologies, companies can better manage their logistics operations, ensuring cost-effectiveness while meeting regulatory requirements.

Comparative International Perspectives

While the U.S. Has specific mileage reimbursement practices governed by the IRS, comparative analysis with international transportation costs provides useful insights. For example, the average road freight cost in Europe was about €1.39 per vehicle-kilometer in 2023, according to the International Road Transport Union.

In China, road freight costs were about 5.1 RMB per vehicle-kilometer, as reported by the World Bank. While these figures do not directly translate into U.S.-style mileage rates, they highlight regional differences in transportation cost structures and underscore the importance of understanding local market conditions when managing international supply chains. These differences stress the need for businesses to develop flexible strategies that can adapt to varying cost structures in different regions, ensuring competitiveness and efficiency across global operations.

Future Outlook and Strategies

Looking ahead, it is crucial for businesses to anticipate further changes in mileage rates and prepare accordingly. Historical trends indicate that IRS mileage rates have been increasing steadily; from early 2022 to 2025, the rate rose from 58.5 cents to 70 cents per mile—a 19.7% increase over three years.

Companies should consider investing in fleet management technologies and alternative transportation modes to reduce reliance on high-cost mileage reimbursements. Rail freight, which emits about one-eighth the CO₂ per ton-mile compared with trucks according to the U.S. Environmental Protection Agency, offers a viable alternative that could mitigate environmental impact and reduce costs. Additionally, exploring electric vehicle (EV) options for fleets could align with both cost-efficiency and sustainability goals, as EV technology continues to advance and infrastructure improves.

Conclusion

The IRS mileage rate hike in 2025 presents significant challenges but also opportunities for businesses involved in both domestic and international supply chains. By understanding the implications of these changes and adopting strategic measures such as advanced tracking technologies and alternative transportation modes, companies can better manage their logistics expenses and enhance overall operational efficiency.

This comprehensive understanding of how domestic cost adjustments ripple through international logistics systems underscores the interconnected nature of modern supply chains and the importance of proactive expense management strategies. In this context, EGERP Panipat – Resource Management for Maximum Business enables organizations to better analyze, plan, and optimize resources as global commerce becomes increasingly complex. Companies that leverage such structured approaches will be better positioned to succeed in a highly competitive marketplace.