Personal Use

In the context of vehicle reimbursement programs, personal use refers to when a personal vehicle is used for any non-work related purpose. This contrasts with business use, when a personal vehicle is used for business purposes as defined by the IRS. Note that the IRS typically considers miles driven commuting from a personal residence to a workplace to be personal use.

Within Fixed and Variable Rate (FAVR) reimbursement programs, it’s important to clearly distinguish between personal use and business use in recordkeeping. Only business use of a personal vehicle that follows IRS regulations is eligible to be reimbursed tax-free. By setting a business use percentage, you determine what percent of a car’s monthly expenses the driver is entitled to as a tax-free reimbursement. 

Personal use is also important to be aware of in the context of fleet and company car programs. When a business vehicle is used for personal reasons, the employee driver may be subject to personal use chargebacks. When employees use a work car for personal purposes, relevant details of this trip are required to be recorded, and the trip is subject to tax by the IRS. A personal use chargeback is when the company requires the employee to pay a taxable amount to cover using the company car for personal reasons. 

Learn more about FAVR reimbursement programs, including guidelines and eligibility. It’s also beneficial to read more details on how taxation in FAVR programs works. For employees and employers, it’s important to stay up-to-date with the most current regulations from the IRS, to help ensure compliance with guidelines and the associated tax benefits. Read about FAVR rules according to the IRS, as of 2019. If you’re wondering whether a FAVR program is a good fit for your business or you are looking for more information on FAVR reimbursements, consider speaking with a Cardata expert to find out more.