Favr Calculator

FAVR Reimbursement Calculator

Detailed Reimbursement Breakdown:

Total Annual Fixed Reimbursement:

Fuel Cost per Mile:

Total Variable Cost per Mile:

Total Annual Variable Reimbursement:

Total Annual FAVR Reimbursement:

$' + totalFAVRReimbursement.toFixed(2) + '

Understanding the Fixed and Variable Rate (FAVR) Reimbursement Plan

The Fixed and Variable Rate (FAVR) reimbursement plan is a common method used by employers to compensate employees for the business use of their personal vehicles. Unlike a simple mileage reimbursement (like the IRS standard rate), FAVR aims to provide a more accurate and equitable reimbursement by separating vehicle costs into two distinct categories: fixed and variable.

What is FAVR?

FAVR is an IRS-approved reimbursement method that allows employers to reimburse employees for the business use of their personal vehicles without the reimbursement being considered taxable income to the employee, provided certain conditions are met. It's designed to cover the actual costs associated with owning and operating a vehicle for business purposes.

Components of FAVR Reimbursement:

A FAVR plan consists of two main parts:

1. Fixed Reimbursement: This component covers the costs of vehicle ownership that do not change with mileage. These are typically paid out on a regular basis (e.g., monthly or annually) regardless of how many business miles are driven. Examples include:
   • Vehicle Depreciation: The loss in value of the vehicle over time.
   • Insurance: The cost of vehicle insurance premiums.
   • License & Registration: Annual fees for vehicle tags and registration.
   • Taxes: Property taxes on the vehicle, if applicable.
   The fixed reimbursement is often calculated based on a "standard" or "benchmark" vehicle that is appropriate for the employee's job function and geographic location.
2. Variable Reimbursement: This component covers the costs that fluctuate directly with the number of miles driven. It is typically paid out per mile driven for business purposes. Examples include:
   • Fuel: The cost of gasoline or other fuel.
   • Maintenance: Routine service, oil changes, and minor repairs.
   • Tires: The cost of tire wear and replacement.
   • Other Operating Costs: Minor wear and tear items.
   The variable reimbursement rate is often adjusted periodically to reflect changes in fuel prices and other operating costs.

Why Use a FAVR Plan?

• Fairness: It provides a more accurate reimbursement than a flat mileage rate, as it accounts for both the fixed costs of ownership and the variable costs of operation.
• Tax Efficiency: When structured correctly, FAVR reimbursements are non-taxable to the employee and tax-deductible for the employer, offering significant tax advantages over taxable car allowances.
• Cost Control for Employers: Employers can better manage and predict their vehicle program costs.
• Employee Satisfaction: Employees feel fairly compensated for using their personal vehicles for work, reducing financial burden and potential dissatisfaction.
• Compliance: Helps employers comply with labor laws that require employees to be reimbursed for necessary business expenses.

How the FAVR Calculator Works:

Our FAVR Reimbursement Calculator helps you estimate the total annual reimbursement an employee might receive under a FAVR plan. You input the various fixed annual costs associated with vehicle ownership and the per-mile variable costs, along with the estimated annual business miles. The calculator then sums these components to provide a comprehensive annual FAVR reimbursement figure.

• Annual Vehicle Depreciation: Enter the estimated annual loss in your vehicle's value.
• Annual Vehicle Insurance: Input your yearly insurance premium.
• Annual License & Registration: Provide the total for your yearly license and registration fees.
• Other Annual Fixed Costs: Include any other recurring annual costs not covered above (e.g., vehicle property tax).
• Fuel Cost per Gallon: Your average local fuel price.
• Vehicle Miles Per Gallon (MPG): Your vehicle's average fuel efficiency.
• Maintenance Cost per Mile: An estimate of how much you spend on maintenance per mile driven.
• Tire Cost per Mile: An estimate of tire wear cost per mile.
• Other Variable Costs per Mile: Any other per-mile operating costs.
• Annual Business Miles: The total number of miles you expect to drive for business in a year.

By understanding and utilizing a FAVR plan, both employers and employees can benefit from a transparent, fair, and tax-efficient vehicle reimbursement solution.