Best For: High-mileage, full-time drivers
Tax Status: 100% tax-free when IRS requirements are met
Complexity: Moderate (structured compliance requirements)
Mileage Range: 5,000+ annual business miles
How it Works
FAVR reimburses drivers in two parts: a monthly payment for costs like insurance and depreciation, and a per-mile rate for things like fuel and maintenance. Rates are based on the required vehicle for the employee’s role, individualized using local driving costs in each driver’s ZIP code.
Why Organizations Choose It
100% tax-free when compliant
Adjusts for local driving costs
Accurate and fair for high-mileage drivers
Can reimburse above the IRS standard mileage rate without becoming taxable
Things to Know
Requires at least five eligible drivers
Drivers have to meet mileage and vehicle eligibility requirements
Most common alternative to company-owned vehicles
If your drivers put a lot of miles on the road each year and work across different regions, FAVR is usually the most accurate and cost-efficient way to reimburse them.
Best For: Occasional or lower-mileage drivers
Tax Status: Tax-free when mileage is logged properly
Complexity: Low
Mileage Range: Typically under 5,000 annual business miles
How it Works
CPM pays drivers a set rate for every business mile they drive. Most companies use the IRS standard mileage rate, though custom, regionally-sensitive rates are also available. When miles are logged properly, reimbursements at or below that rate stay tax-free.
Why Organizations Choose It
Simple to run
Not many rules to manage
Keeps budgeting predictable
Easy to roll out across teams
Tax-free for contract and part-time employees
Considerations
May overpay or underpay depending on mileage patterns
Less precise for high-mileage drivers
If you want a straightforward mileage program, CPM offers an easy way to reimburse drivers that stays compliant without adding much admin work.
Best For: Teams needing flexibility or predictable reimbursements
Tax Status: Tax-free up to the IRS standard mileage rate
Complexity: Low to Moderate
Mileage Range: Flexible
How it Works
A Tax-Free Car Allowance (TFCA) lets companies reimburse employees for using their own car for work in a flexible way. Payments can be a flat monthly amount, a per-mile rate, or a mix of both. As long as business miles are logged and the total stays within the IRS mileage rate, the reimbursement stays tax-free.
Why Organizations Choose It
More flexible than FAVR, works when FAVR isn’t a fit
Fewer rules to manage
Steadier monthly costs
Helps provide a low-tax car allowance benefit for lower-mileage drivers
Considerations
Anything above the IRS mileage rate becomes taxable
Not as precise across locations as FAVR
If you want flexibility without losing the tax benefits, TFCA offers a practical middle ground between simple mileage programs and more structured options like FAVR.