Base Locality

In a FAVR program, a base locality is the area whose vehicle costs are used to calculate an employee’s reimbursement. It connects payments to prices in the places where the employee lives and works.

According to the IRS’s FAVR guidelines, fixed costs, such as insurance and registration, are tied to where the employee lives. Variable costs, such as fuel and maintenance, are tied to where they drive for work.

Using local costs helps FAVR payments reflect differences in vehicle expenses between regions.