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Fixed and Variable Rate (FAVR) Glossary

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



Accountable Allowance

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

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Business Use Percentage

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

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Cents per Mile (CPM)

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

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Commute Mileage

Commute mileage is considered personal by the IRS.

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

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FAVR Insurance Compliance

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

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Federal Rate, The

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

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Five-Thousand Mile Rule

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

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Fixed and Variable Rate (FAVR)

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

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Fixed Reimbursement

Fixed expenses in Fixed and Variable Rate vehicle reimbursement programs.

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Insurance Requirement

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

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IRS Mileage Records Defined 

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

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IRS Publication 463

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

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IRS Standard Rate

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

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IRS Vehicle Declaration

IRS vehicle declarations in FAVR reimbursement programs. 

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MACRS (Modified Accelerated Cost Recovery System)

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

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Motor Vehicle Record

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

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Non-Taxable Limit

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

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Parking Reimbursements

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

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Personal Mileage

Mileage that does not meet IRS criteria for business mileage. 

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Personal Use

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

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Qualified Business Use 

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

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Qualified Nonpersonal Use Vehicles

Specialized vehicles designed exclusively for business-related purposes.

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Retention Cycle

Retention cycles and how they impact depreciation in FAVR.

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Taxable Income Test

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

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Toll Reimbursement

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

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Variable Reimbursement

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

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Vehicle Age Compliance

Vehicle age compliance and its role in FAVR vehicle programs. 

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Vehicle Capital Cost

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

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Vehicle Cost Compliance

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

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Vehicle Profile

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

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Vehicle Property Taxes

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

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Further Reading