Qualified Business Use 

Qualified business use is the business use of a vehicle that falls under IRS regulations. It includes the actual relevant mileage that follows the guidelines for the applicable vehicle reimbursement program. Generally, mileage from qualified business use is eligible for tax-free reimbursement. The IRS defines which type of trips are considered to be business use, which can typically include travel for meetings, client visits, and other eligible travel between places of business. It’s important to note that commuting to work — driving from a home residence to the office — isn’t considered qualified business use of a personal vehicle. Therefore, commuting mileage is typically not eligible for tax-free reimbursement.

Qualified business use is also important in calculating business use percentage, which is the percentage of mileage driven in a vehicle that’s allotted to eligible business use, and therefore eligible for reimbursement. For example, a vehicle may have a business use percentage of 70%, and a personal use percentage of 30%. The personal use percentage is specified to cover any non-work travel, such as commuting, personal errands, appointments, and using the vehicle during non-work hours for personal trips. 

In Fixed and Variable Rate (FAVR) vehicle reimbursement programs, employees are reimbursed for qualified business use of their personal vehicle. Understanding business use is important in calculating reimbursements and determining eligibility for the tax benefits of FAVR programs. 

If you’re curious to learn more about FAVR programs generally, read this guide to FAVR which outlines how FAVR is different from other vehicle reimbursement programs. And, find out more about FAVR regulations from the IRS, as of 2019. To ensure compliance with IRS regulations of FAVR programs, be sure to consult the most up-to-date resources from the IRS.

Or, speak with a Cardata expert to learn more about how FAVR could impact your business.