FAQs: FAVR and Mileage Programs

FAVR is a vehicle reimbursement program sanctioned by IRS tax law. It is an acronym for “fixed and variable rate” reimbursement.

FAVR is a car allowance or reimbursement paid monthly to employees. When they drive their personal car for work, FAVR uses an employee’s ZIP code to calculate their fixed and variable expenses.

FAVR captures monthly fixed expenses (such as depreciation, licensing and insurance) and variable expenses that can fluctuate (such as fuel, maintenance, and repairs). With FAVR, employers can reimburse employees to the exact cent and mile.

Cardata distinguishes our FAVR programs by offering:
– Transparent pricing and contract terms
– An attentive and responsive customer service team
– Robust mileage tracking and business intelligence software

Speak to us about our FAVR programs.

When your employee drivers meet the criteria for the FAVR program, reimbursements are paid totally tax-free. Driving is a legitimate business expense, and the IRS stands by that belief in its guidance for FAVR programs.

With Cardata’s powerful software and keen program oversight, we can ensure your reimbursement program remains IRS-compliant and tax-efficient.

A FAVR allowance is calculated by gathering local cost data for things like fuel, maintenance, and repairs; vehicle information like depreciation schedules and parts prices; and driver behavior facts like mileage bands. Once you have all this information, you can create one fixed monthly allowance rate, for example $300 per month, and one variable per-mile rate, like $0.20 per mile. Every month, you pay the fixed allowance to the driver, together with the variable rate times a tally of their miles driven.

Cardata verifies every driver’s insurance policy to minimize your risk profile. The wrong insurance endorsement can leave you liable, but Cardata takes care of that. There are more than 100 insurers in the US, but we have the expertise to verify all their various policies.

The right insurance coverage is a requirement for FAVR programs. Cardata works with every driver to make sure they are covered.

The IRS standard mileage rate is an optional rate that you can use to reimburse your drivers who use their personal car for work. The IRS updates the rate(s) every year. You can reimburse anything up to and including the IRS standard tax-free. Anything difference above the rate is taxable. 

The IRS standard rate in 2024 are: 

• 67 cents per mile driven for business use
• 21 cents per mile driven for medical or moving mileage for qualified active-duty members of the Armed Forces
• 14 cents per mile driven in service of charitable organizations*

*Source: irs.gov

A car allowance is a sum paid or reimbursed to drivers who use their personal vehicles for work. A car allowance can be unaccountable (no recordkeeping or documentation of driving expenses) or it can be a tax-free car allowance.

A tax-free car allowance (TFCA) is any car allowance that is accountable and compared to the IRS standard rate to determine taxation. These allowances are governed by IRS policy set out in IRS publication 463. 

Cardata administers TFCAs for their clients.

Cents per Mile (CPM) is a method that businesses can use to reimburse occasional drivers. It is also the rate at which drivers can deduct driving expenses from their taxes. The IRS offers a standard CPM rate for business driving that is updated annually. In 2023, the rate is 65.5¢ cents per mile. 

While the IRS rate is tax-free, it doesn’t take into account regional sensitivities like a FAVR program does. In addition to the inequity created by using a single rate for all drivers, the IRS rate can also lead to overpayment or underpayment of vehicle reimbursements. However, for many customers Cents per Mile is a great program.

Making your car allowance tax-free is easy and will save you 30% right away. If you have a taxable car allowance, we can help you save money and pay your people more.

Speak to us about car allowance.

Firstly, you don’t have to! We run hybrid programs for our clients, which combine elements of several programs.

Moreover, the best way to determine is to call us! After a few questions about driver behaviour and company goals, we can assist in determining the balance of programs best suited for your organization!

When your employees drive for work, they incur fixed and variable expenses. An example of the former is depreciation; of the latter, gas.

Our Tax-Free Car Allowance reimbursements cover these expenses, meaning your employees do not pay out of pocket to drive.

As long as your drivers meet the criteria for the TFCA program, reimbursements are paid totally tax-free. Driving is a legitimate business expense; the IRS enshrines that in its guidance for programs like these.

Cardata uses software and keen program oversight to keep your program IRS-compliant and tax-efficient.

Cardata verifies every driver’s insurance policy to minimize your risk profile. The wrong insurance endorsement can leave you liable, but Cardata takes care of that. There are more than 100 insurers in the US, but we have the expertise to verify all their various policies.

The right insurance coverage is a requirement for FAVR programs. Cardata works with every driver to make sure they are covered.

The IRS standard mileage rate is an optional rate that you can use to reimburse your drivers who use their personal car for work. The IRS updates the rate(s) every year. You can reimburse anything up to and including the IRS standard tax-free. Anything difference above the rate is taxable. 

The IRS standard rate in 2024 are: 

• 67 cents per mile driven for business use
• 21 cents per mile driven for medical or moving mileage for qualified active-duty members of the Armed Forces
• 14 cents per mile driven in service of charitable organizations*

*Source: irs.gov

Cardata offers a suite of software and services to track and reimburse your employees for using their personal vehicle for work. We enable companies to offer their employees accurate and tax-free reimbursements; down to the exact cent and mile. We build custom programs to ensure we match the right reimbursement model to our clients. As a result, we offer a variety of programs, including FAVR, Cents per Mile, and other hybrid models.

Yes, we are! Security has always been a pillar of Cardata’s software solutions. One way we demonstrate this is with our SOC 2 certification.

If you are a midmarket or enterprise business looking for an alternative tax-free solution for your vehicle reimbursement program, plus business intelligence reporting and a consultative approach to your reimbursement model, then Cardata is right for you.

Speak with a sales rep.

By switching to Cardata, you can expect to save up to 30% on your reimbursements. Cardata’s reimbursement solution reduces liability, removes administration and generates annual cost savings.

Speak with a sales rep.

Fleets are necessary for certain employees to do their jobs. First response, food transportation, and heavy hauling are specialized industries where fleets of vehicles are necessary.

Most professions do not require specialized vehicles, however, so companies are beginning to transition off of fleets of company cars in favor of reimbursement programs.

Yes. FAVR is a reimbursement program that lets employees bring their personal cars to work, and get reimbursed for the business expenses from their employer, tax-free.

Speak to us about leaving fleets.

No. Cardata has helped a variety of clients through fleet to FAVR transitions. If you want to switch, there are techniques you can use to manage the change.

Speak to us about leaving fleets.

Yes. Just like with direct deposit paychecks, they must do so in order to receive their reimbursements. Cardata uses some of the highest available security systems to keep this information safe.

Direct Pay runs once per month, since vehicle reimbursements are paid for the prior month in entirety. Many programs have a fixed monthly allowance in addition to a variable mileage rate, so once per-month payments are the most logical.

Direct Pay is our way of automating vehicle reimbursement payments. It is a payment processing system that sends reimbursement payments directly to employee accounts.

Cardata Mobile is a Mileage Tracking application that businesses use to record mileage for tax and business efficiency purposes. It is ideal for businesses with drivers whose employees use their personal vehicle for work.

Cardata Mobile records all the information needed to substantiate business mileage for tax purposes. When you drive for work, tax authorities want you to capture not just the mileage traveled, but also things like the business purpose of the trip.

Cardata Mobile is a privacy-first application. This starts with robust application security, and goes all the way down to manual driver privacy controls, like toggling off tracking for personal trips.

Mileage Tracking, in Cardata Mobile, works by establishing your position through GPS satellites, meaning you don’t even need phone data to record your mileage.

Based in Cardata Cloud, and in coordination with your customer service representatives, you can pull reports that bring the data of your vehicle reimbursement program to life, so you can make decisions about your vehicle operations.

You can pull reports on anything that your program captures. From the total miles your team has traveled to the cost of your operations, there is a wealth of data at your disposal. Some examples of available reports include:

• Real-time fuel prices and trend detection for any area code.
• Out of compliance reports for all drivers.
• Daily reports show how much or how little each driver is driving for business.
• Our reports include saved spots to assist drivers when they reach frequently visited locations. Managers can use this as an overview of their employees’ days.

It’s hard to predict the many ways reporting will make your program better. However, a few examples might be:

• Mileage Audit Reports allow you to adjust reimbursements if necessary. 
• Daily trip reporting gives you telematics-tier data on your driving team.
• Taxation reports let you plan ahead and inform your team of deductions ahead of time.