The optional standard mileage rate for automobiles driven for business will increase 3 cents in 2025, the Internal Revenue Service said Thursday, but the mileage rates for vehicles used for other purposes will stay unchanged from this year. 

Optional standard mileage rates are employed to compute the deductible costs of operating vehicles for business, charitable and medical purposes, in addition to active-duty members of the Armed Forces who are moving. 

Starting Jan. 1, 2025, the standard mileage rates for the use of a car, van, pickup or panel truck will be: 

• 70 cents per mile driven for business use, up 3 cents from 2024;
• 21 cents per mile driven for medical purposes, the same as in 2024;
• 21 cents per mile driven for moving purposes for qualified active-duty members of the Armed Forces, unchanged from last year; and,
• 14 cents per mile driven in service of charitable organizations, equal to the rate in 2024. 

The rates apply to fully electric and hybrid automobiles, in addition to gasoline and diesel-powered vehicles. 

While the mileage rate for charitable use is set by statute, the mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes, meanwhile, is based on only the variable costs from the annual study. 

Under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. And only taxpayers who are members of the military on active duty may claim a deduction for moving expenses incurred while relocating under orders to a permanent change of station. 

Use of the standard mileage rates is optional. Taxpayers can instead choose to calculate the actual costs of using their vehicle. 

Taxpayers using the standard mileage rate for a vehicle they own and use for business must opt to use the rate in the first year the automobile is available for business use. Then, in later years, they’re allowed to choose to use the standard mileage rate or actual expenses. 

For a leased vehicle, taxpayers using the standard mileage rate must employ that method for the entire lease period, including renewals. 

Notice 2025-05 provides the optional 2025 standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes. The notice also includes the amount taxpayers need to use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that can be used in computing the allowance under a fixed and variable rate plan. In addition, the notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2025 for which employers may use the fleet-average valuation rule in Section 1.61-21(d)(5)(v) or the vehicle cents-per-mile valuation rule in Section 1.61-21(e). 

The Financial Accounting Foundation released a report that found the Private Company Council has been performing its duties effectively in representing the views of privately held companies and advising the Financial Accounting Standards Board and should continue to operate.

The FAF, which oversees FASB and the PCC, as well as the Governmental Accounting Standards Board, began reevaluating the role of the PCC in February. The PCC emerged in 2012 after the FAF, which oversees both FASB and the Government Accounting Standards Board, heard feedback from private companies that they would like more of a voice in standard-setting at FASB.

Previously, FASB and the American Institute of CPAs had operated a joint committee known as the Private Company Financial Reporting Committee. The FAF, the AICPA and the National Association of State Boards of Accountancy set up a Blue-Ribbon Panel on Standard Setting for Private Companies in 2009 to study the issue of allowing greater input from private companies, and the panel issued a plan in 2011 calling for establishment of a separate council under the oversight of the FAF that would hold its own votes. However, within a few years, it became more of an advisory committee to FASB, much like the Financial Accounting Standards Advisory Council, but not a standard-setter in its own right. The PCC still meets regularly, including  this week, and FASB continues to report on its meetings.

The PCC uses a Private Company Decision-Making Framework to advise FASB on the appropriate accounting treatment for private companies for items under active consideration on the FASB’s technical agenda. The PCC also advises the FASB on possible alternatives within GAAP to address the needs of users of private company financial statements. Any proposed changes to GAAP are subject to endorsement by FASB.

Led by the Standard-Setting Process Oversight Committee of the FAF Board of Trustees, the review elicited input from stakeholders vita surveys, virtual meetings, and letters in response to a request for public comment.

The FAF trustees determined that, overall, the PCC is fulfilling its mission and duties effectively and that it should maintain its current mission, remit and structure. The trustees also affirmed the PCC’s current meeting operations and culture. However, the report did point to opportunities for positive change, including ramping up the PCC’s communications activities, publishing a PCC annual report, and enhancing recruiting activities to identify and select new PCC members in the future.

“Good governance prompts us to conduct periodic reviews of our important advisory councils,” said FAF trustee and co-chair of the Standard-Setting Process Oversight Committee Timothy Ryan, head of technology and business enablement at Citigroup, in a statement Wednesday. “I am pleased that stakeholders largely expressed support for the PCC while making excellent suggestions for potential improvements to make it an even more effective body.”

Many stakeholders agreed the PCC is effectively fulfilling its advisory role to FASB, striking the right balance between reducing complexity and ensuring relevant and reliable information to stakeholders, according to the report. They also expressed views that the PCC has been successful in addressing the needs of the users of private company financial statements, indicating they have observed wide adoption of private company alternatives and practical expedients. 

“Overall, the sentiments focused on the positive impact the PCC has had on financial reporting for private companies and their stakeholders since its establishment in 2012, with a recognition that the PCC is the optimal vehicle to continue this important work,” said the report. 

Several stakeholders said the PCC has successfully educated FASB on issues where private companies operate differently than how public companies operate. For example, the PCC provided feedback to FASB on certain aspects of the leasing standard, and on areas that resulted in GAAP alternatives for private companies for goodwill, intangibles, hedge accounting and variable interest entity consolidation standards. 

“We are grateful to the many stakeholders who freely shared their diverse perspectives about the PCC,” added FAF trustee and co-chair of the Standard-Setting Process Oversight Committee Manju Ganeriwala, the former treasurer of the Commonwealth of Virginia, in a statement. “We are confident that the PCC can sustain its excellent track record of providing thoughtful, expert advice and counsel to the FASB for many years to come.”

The AICPA praised the findings of the report. “The American Institute of Certified Public Accountants appreciates the thoroughness of the Financial Accounting Foundation’s review of the Private Company Council, and we share the report’s findings that the council has been effective in its mission,” stated AICPA vice president of financial reporting Daniel Noll. “The AICPA has observed all of the PCC meetings since its inception and notes that it has fulfilled its role well, both in  suggesting changes to existing GAAP and in advising on prospective GAAP. As the FAF’s report notes, there are thousands of public companies in the United States but millions of private companies, so this is a critical advisory role for our capital markets. We look forward to more important work by the PCC and its continued advocacy for stakeholders who depend on financial reporting by private companies.”

While all buyers look for a degree of figurative goodwill from advisory practice sellers, some financial advisors could reap tax savings by offering up that literal type of asset in the deal. 

The personal goodwill assets of advisors seeking a succession transaction before retirement or making a breakaway move to a registered investment advisory firm aggregator from the wirehouses generates a long-term capital gain that is taxed at a rate up to 17 percentage points lower than ordinary income at the top bracket, two experts told Financial Planning. The possible tax strategy comes with caveats. But more prospective buyers and sellers are inquiring about the potential benefits, according to Corey Kupfer, who advises RIAs and other wealth management firms on M&A and succession as the founder of law firm Kupfer.

Sales of personal goodwill may help solve a problem that pops up for the founders of practices with one or more younger advisors who have built a base of clients without amassing any equity. Such sales may also eliminate the need for a traditional “12 months and a day” waiting period to complete a deal in order to ensure sellers get the long-term rate, Kupfer said.

“There’s some friction because you’re saying to an advisor that you have to wait over a year,” he said in an interview. “My sense is that it’s really only within the last two or three years that this has taken off, and the reason is that there’s a lot of competition for deals out there.”

READ MORE: 25 tax tips for RIA M&A deals and other small business sales

Sellers should consult a tax expert early and often to consider every possible rule or implication from this form of asset transaction, according to Kupfer and Thomas Phelan, a partner with the Troutman Pepper Hamilton Sanders law firm who advises clients on M&A, reorganizations and cross-border deals.

Goodwill represents the difference between the total purchase price for a company in a deal and the market value of the firm’s assets minus liabilities. Within that umbrella, personal goodwill adds up to an especially important part of the purchase-price allocation for advisory practices that are “closely held corporations” with their value “very much targeted on the personal relationships of Jim Smith and his technical expertise,” Phelan noted in an interview.

In a personal transaction that distinguishes those assets from the goodwill of the corporation, the buyer “ends up in the same position” with “a deal that allows them to get a step up and a depreciable asset,” he said. The sellers, however, steer clear of paying taxes at both the corporate and individual levels in the personal goodwill transaction.

“If they’re operating out of a C-corporation, then I think the personal goodwill transaction seems potentially more appealing,” Phelan said. “The seller benefit is they get the capital gain and they don’t have to pay double tax. … You can strip a lot of value potentially out of the corporation, thus avoiding the double tax.”

The transactions require careful planning for a process that won’t be a fit for every possible seller out there, according to a guide compiled two years ago by attorneys Robert Greising and Travis Lovett of the Krieg DeVault law firm.

“A personal goodwill allocation approach should be raised early in the negotiation process,” they wrote. “This will safeguard against a challenge that allocation of personal goodwill was an afterthought, with the value negotiated by the parties assuming the goodwill was part of the business. The seller should obtain a third-party appraisal to establish the existence and the value of the personal goodwill. A separate agreement or, at a minimum, separate provisions of a purchase agreement should be used to evidence the sale of the personal goodwill separately from the corporate goodwill of the business. Could a personal goodwill allocation be right for your sale? Ultimately, answering this fact-sensitive question will benefit from the help of experienced professionals.”

READ MORE: Business entities affect taxes and M&A — how RIAs weigh the choice

Kupfer has worked on the buy or sell side of eight to 10 personal goodwill transactions over the past couple of years — an amount that is “not the majority, certainly” but a decent number considering that “people are still learning about it,” he said. Buyers interested in drawing wirehouse teams into the RIA channel in particular are reaching out to Kupfer to discuss them, with “one or two that haven’t been able to get comfortable,” others that are vetting the idea and “some of them I know are planning on using it,” he said.      

In addition, he advised on one sale of an independent advisory practice with the personal goodwill structure on behalf of the sole owner of a firm who managed roughly 70% of the client base. Two other advisors respectively served another 10% and 20% of the customers, but they didn’t own any of the firm’s equity. 

That dynamic created a “potential problem” from the fact that the firm would turn less valuable if those advisors left before the succession deal, or if the owner decided to share some of the deal proceeds with them in the form of ordinary income, Kupfer noted. So the owner sold 70% of the firm’s equity, then negotiated a personal goodwill transaction with the same buyer for the other 30% on behalf of the two other advisors.

“The only reason you need this is, when somebody doesn’t have an asset to sell because they don’t own the client list,” Kupfer said. “We were able to get them capital gains treatment, so, in the independent space, that’s the applicable scenario for personal goodwill.” 

Breakaway advisors’ success over the past decade in carrying over 85% to 90% of their client bases in many cases when leaving wirehouses — despite their former firms’ nonsolicit agreements and frequent legal wrangling around those moves — has bolstered the appeal of personal goodwill deals. Comparable M&A transactions among captive insurance agents are fueling the stronger momentum for them as well, Kupfer noted.

In the “worst-case scenario,” the seller could wind up with an IRS finding that the deal proceeds were ordinary income and the buyer may wind up with “a failure to withhold claim” based on that compensation, he said. Still, he hasn’t seen the agency challenge any of the deals.

“If we had 10 or 20 years of history we could be more comfortable,” he said. “In the insurance space especially and in other spaces you do have that history of it being successful.”

READ MORE: More RIA buyers are offering equity. Here’s what sellers should know

Such nuances with personal goodwill deals point to the necessity of engaging with experts well in advance about topics like the terms of prior employment contracts, the structure of a deal and the resulting taxes, according to Phelan. He has “often seen it come up” when the owners of a closely held corporation find out about their future bills to Uncle Sam under a deal after signing the letter of intent with a buyer, he said. 

“You want to talk to someone on the tax front early — ideally in the LOI process when it’s initially being negotiated,” Phelan said. “There’s an LOI, they’re buying the business and then they realize, ‘Oh shoot, we’re going to get hit with a double tax on this.'”