FAVR (Fixed and Variable Rate)
FAVR is a vehicle reimbursement method that combines a fixed payment for ownership costs with per-mile payments for operating costs, based on vehicle costs in the areas where employees live and work.
Full definition
Fixed and variable rate reimbursement, or FAVR, is a method of reimbursing employees for using their personal vehicles for work. It combines a regular fixed payment for ownership costs, such as insurance and depreciation, with a per-mile payment for operating costs, such as fuel and maintenance.
FAVR calculations use a standard vehicle and costs where employees actually live and work, rather than applying one national mileage rate to every driver as when companies use the IRS standard mileage rate.
FAVR reimbursements are tax-free when programs meet IRS requirements for eligibility, calculations, and documentation.