Mileage Reimbursement Glossary

Explore our mileage reimbursement glossary for simple definitions of key terms, programs, and compliance rules.

Glossary

Accountable Allowance

Accountable allowance is an IRS-sanctioned program for employers to reimburse employees for business use of their personal vehicle.

Acquisition Cost | Fleet Management

The total expense required to purchase or lease a vehicle or piece of equipment. This typically includes the base price, dealership fees, upfitting costs, and taxes/registration.

Alternative Fuels (Alt-Fuel) | Fleet Management

Alternative fuels refer to non-traditional energy sources used to power vehicles, replacing or supplementing gasoline and diesel.

Asset Tracking | Fleet Management

Monitoring the location and status of vehicles and equipment, usually via GPS or telematics devices, to better allocate and secure fleet assets.

Asset Utilization | Fleet Management

Monitoring the location and status of vehicles and equipment, usually via GPS or telematics devices, to better allocate and secure fleet assets.

Automated Vehicle Location (AVL) | Fleet Management

A system that uses GPS tracking, telecommunications technology, and software to track vehicles and other assets. It provides real-time tracking and the ability to monitor driver behavior.

Automotive Fleet & Leasing Association (AFLA)

Automotive Fleet & Leasing Association (AFLA) is a professional organization founded in 1969 to advance the commercial fleet management industry through education, networking, research, technical standards, and member representation.

Auxiliary Equipment | Fleet Management

Auxiliary equipment in fleet vehicle management refers to any manual, mechanical, electrical or hydraulic device mounted to a vehicle and powered by the vehicle’s engine (or its own motor) that enables the vehicle or the device to perform work beyond basic transportation duties.

Bailment Pool | Fleet Management

A bailment pool is an inventory of unassigned, already-built chassis or finished vehicles that an original-equipment manufacturer (OEM) places on consignment with a body company or upfitter while retaining title until a dealer, leasing company, or fleet buyer selects the unit for sale or further modification.

Business Use Percentage

A business use percentage (BUP) is the portion of a driver’s total mileage that is assumed to be business mileage.

Cents per Mile (CPM)

A cents per mile (CPM) program is a simple, tax-free reimbursement program that employers can use to compensate their employees who drive for work.

Certified Automotive Fleet Manager (CAFM)

The Certified Automotive Fleet Manager (CAFM) credential—developed and administered by the NAFA Fleet Management Association—has stood for more than 35 years as the fleet industry’s most prestigious professional designation.

Chargebacks | Fleet Management

When an employee uses a company vehicle for personal reasons—such as commuting, weekend trips, or running errands—the business often charges the employee for this non-business usage through a process known as a personal use chargeback.

Closed-End Lease | Fleet Management

A closed-end lease in fleet management is a fixed-term vehicle leasing agreement that offers predictable costs and minimal financial risk for the lessee.

Commercial Driver’s License (CDL) | Fleet Management

A Commercial Driver’s License (CDL) is a specialized credential required to operate large or heavy vehicles for commercial purposes, such as tractor-trailers, buses, and vehicles transporting hazardous materials.

Commercial Fleet

A set of vehicles owned/leased by a business for its employees, often including company cars, sales fleet vehicles, or executive vehicles.

Commute Mileage

Commute mileage is mileage recorded from trips between an employee’s home and their primary place of work. Under IRS rules, this mileage is personal and cannot be submitted for reimbursement.

Compliance, Safety, Accountability (CSA) | Fleet Management

Compliance, Safety, Accountability (CSA) is a safety compliance and enforcement program developed by the Federal Motor Carrier Safety Administration (FMCSA), a division of the U.S. Department of Transportation.

Consignment | Fleet Management

In fleet management, consignment refers to an arrangement where a vehicle owner—such as a leasing company, fleet operator, or government agency—entrusts their vehicle to a third party, typically an auction house or dealership, for the purpose of resale.

Cooperative Procurement | Fleet Management

Cooperative procurement is a strategic approach wherein multiple government agencies collaborate to purchase goods and services—such as vehicles and related equipment—through a single, consolidated contract.

Depreciation

Generally, depreciation is the decrease in the value of an asset over time. On a FAVR program, depreciation usually refers to the depreciation component of a driver’s monthly fixed reimbursement.

FAVR Insurance Compliance

FAVR insurance compliance is a tax rule on fixed and variable rate (FAVR) reimbursement programs.

Federal Rate

The federal rate is a safe harbor expense reimbursement rate that can be used instead of claiming business expenses directly.

Five-Thousand Mile Rule

The 5,000 mile rule is one of the three FAVR tax rules. If a driver is in compliance with all three FAVR tax rules, their reimbursement will not be tested for taxable income.

Fixed and Variable Rate (FAVR)

A Fixed and Variable Rate (FAVR) program is an IRS-sanctioned vehicle reimbursement program that is tax free for compliant drivers.

Fixed Reimbursement

Fixed reimbursements are one of the two main components of FAVR reimbursements. A fixed reimbursement is a flat dollar amount that is paid to drivers each month, regardless of business mileage.

Insurance Requirement

An insurance requirement is the amount of coverage a company requires its employees to carry in order to be eligible for reimbursement.

IRS Mileage Records Defined

IRS mileage records are detailed logs of business mileage that are tracked according to IRS guidelines. For many vehicle reimbursement programs, such as Fixed and Variable Rate (FAVR) programs and Cents per Mile programs, tracking business mileage is an essential part of being compliant.

IRS Publication 463

IRS Publication 463: Travel, Gift, and Car Expenses is a foundational tax document that provides guidance on tax-deductible business expenses and tax-free expense reimbursement.

IRS Standard Rate

The IRS standard rate is a tax-free mileage reimbursement rate set by the IRS. The IRS typically updates this rate once per year based on changes in the average cost of driving.

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.

MACRS (Modified Accelerated Cost Recovery System)

MACRS, or Modified Accelerated Cost Recovery System, is a system for calculating asset depreciation in the United States. Under MACRS, deductions are typically greater in the early stages of an asset’s lifespan, and decrease as time passes.

Motor Vehicle Record

A motor vehicle record (MVR) is a formal report that outlines an individual’s driving history. Motor vehicle records include information like accidents, tickets, violations, and more.

Non-Taxable Limit

When a driver’s reimbursement is tested for taxable income, their non-taxable limit is the maximum amount that they can receive without paying tax. It is equal to that driver’s business mileage in the period being tested, multiplied by the IRS standard rate.

Open-End Lease | Fleet Management

An open-end lease is a flexible vehicle leasing arrangement commonly used in commercial fleet management across the U.S. and Canada.

Parking Reimbursements

Parking expenses are not included in FAVR reimbursements or the standard mileage rate. Instead, parking can be reimbursed tax-free using the actual expenses method described in IRS publication 463.

Personal Mileage

Personal mileage is the amount of mileage driven for personal, non-work-related reasons. On vehicle reimbursement programs and company car programs, separating personal mileage and business mileage has important tax implications.

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.

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.

Qualified Nonpersonal Use Vehicles

Qualified Nonpersonal Use Vehicles (QNPUVs) are specialized vehicles designed exclusively for business-related purposes.

Retention Cycle

A retention cycle or retention period is a key variable used to calculate auto reimbursements using a vehicle profile. The retention cycle is the number of years a vehicle profile is assumed to be owned before it is traded in.

Taxable Income Test

The taxable income test is a simple procedure for assessing taxable income on FAVR and 463 reimbursements. It is applied quarterly for FAVR drivers that are out of tax compliance, and for all 463 drivers.

Toll Reimbursement

Toll expenses are not included in FAVR reimbursements or the standard mileage rate. Instead, tolls can be reimbursed tax-free using the actual expenses method described in IRS publication 463.

Variable Reimbursement

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

Vehicle Age Compliance

FAVR vehicle cost compliance is one of the three FAVR tax rules. If a driver is in compliance with all three FAVR tax rules, their reimbursement will not be tested for taxable income.

Vehicle Capital Cost

Vehicle capital cost is the amount of money that a car costs when it is new. Capital cost is used to calculate fixed reimbursements using vehicle profiles and to measure vehicle cost compliance on FAVR programs.

Vehicle Cost Compliance

FAVR vehicle cost compliance is one of the three FAVR tax rules. If a driver is in compliance with all three FAVR tax rules, their reimbursement will not be tested for taxable income.

Vehicle Profile

A vehicle profile, or program standard vehicle, is a hypothetical car that is used to calculate fixed and variable reimbursements on all FAVR programs and some accountable allowances.

Vehicle Property Taxes

A vehicle property tax is a type of personal property tax that some state and local governments require car owners to pay. Vehicle property taxes are typically charged annually in January, but details vary.

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