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Fixed and Variable Rate (FAVR) Glossary

The definitive source to Fixed and Variable Rate (FAVR) terminology.

Glossary

A

Accountable Allowance

Accountable allowance is a program for business use of personal vehicles.

B

Business Use Percentage

The portion of a driver's total mileage assumed to be business mileage.

C

Cents per Mile (CPM)

A Cents per Mile (CPM) program is a simple, tax-free reimbursement program.

Commute Mileage

Commute mileage is considered personal by the IRS.

D

Depreciation

On FAVR, depreciation refers to the depreciation component of a driver’s reimbursement.

F

FAVR Insurance Compliance

A secondary FAVR tax rule that is rarely applied in practice.

Federal Rate, The

A safe harbor reimbursement rate used in place of actual business expenses.

Five-Thousand Mile Rule

The 5,000 mile rule in Fixed and Variable Rate (FAVR) reimbursement programs.

Fixed and Variable Rate (FAVR)

FAVR reimbursement programs, the importance of IRS compliance, tax savings potential.

Fixed Reimbursement

Fixed expenses in Fixed and Variable Rate vehicle reimbursement programs.

I

Insurance Requirement

The amount of coverage a required of employees to be eligible for reimbursement.

IRS Mileage Records Defined

IRS mileage records are logs drivers and companies use to substantiate business mileage.

IRS Publication 463

IRS Publication 463 is a tax document relating to business travel expenses.

IRS Standard Rate

A tax-free mileage reimbursement rate set by the IRS.

IRS Vehicle Declaration

IRS vehicle declarations in FAVR reimbursement programs.

M

MACRS (Modified Accelerated Cost Recovery System)

MACRS is a system for calculating asset depreciation in the United States.

Motor Vehicle Record

A motor vehicle record (MVR) is a formal report that outlines an individual’s driving history.

N

Non-Taxable Limit

The non-taxable limit is the maximum reimbursement that a driver can receive without paying tax.

P

Parking Reimbursements

Parking can be reimbursed tax-free using the actual expenses method.

Personal Mileage

Mileage that does not meet IRS criteria for business mileage.

Personal Use

Personal use of a company car can result in taxation by the IRS.

Q

Qualified Business Use

Qualified business use is the business use of a vehicle that falls under IRS regulations.

Qualified Nonpersonal Use Vehicles

Specialized vehicles designed exclusively for business-related purposes.

R

Retention Cycle

Retention cycles and how they impact depreciation in FAVR.

T

Taxable Income Test

The taxable income test is a simple procedure for assessing taxable income on FAVR.

Toll Reimbursement

Tolls can be reimbursed tax free using the actual expenses method.

V

Variable Reimbursement

Variable reimbursements are one of the two main components of FAVR reimbursements.

Vehicle Age Compliance

Vehicle age compliance and its role in FAVR vehicle programs.

Vehicle Capital Cost

The amount of money that a vehicle or vehicle profile costs.

Vehicle Cost Compliance

Vehicle cost compliance rules, one of the three main FAVR compliance rules.

Vehicle Profile

Vehicle profiles (or program standard vehicles) and how they factor into FAVR.

Vehicle Property Taxes

A vehicle property tax is a type of personal property tax that some state and local governments require.

Further Reading

Resources Index