IRS Vehicle Declaration

An IRS vehicle declaration is a short description of a driver’s personal vehicle that drivers must submit to participate in a FAVR, 463, or CPM reimbursement program. Vehicle declarations are submitted at program registration and then re-submitted once per year. 

Vehicle declarations include the make, model, year, MSRP, and current odometer reading of the car that’s being registered. They also include a self-declaration where drivers are asked if they have claimed accelerated depreciation on that vehicle on their personal taxes. 

The purpose of a vehicle declaration is for employees to provide information about the vehicle they’re being reimbursed for to the IRS, and to measure tax compliance on FAVR programs. 

On FAVR, the model year and MSRP that a driver reports on their vehicle declaration is used to determine whether they are in vehicle age compliance and vehicle cost compliance. For a driver to be in vehicle age compliance, their car must not be older than the retention cycle of their FAVR vehicle profile. To be in vehicle cost compliance, the MSRP they submit must be at least 90% of the cost of their FAVR vehicle profile. If a driver’s vehicle is out of compliance with one of both of these rules, their FAVR reimbursement will be tested for taxable income. 

The depreciation declaration is also used to determine FAVR tax compliance. If a driver has claimed accelerated depreciation on their vehicle on their personal taxes, they will be tested for taxable income on FAVR. 

Learn more about how FAVR tax rules work, including other compliance regulations and eligibility requirements. To discover more about FAVR programs, read this guide to FAVR that covers the basic elements of these programs and how businesses use them to provide tax-free reimbursements to employees. To speak to someone about how a FAVR program would work for your business, talk to an expert at Cardata.