How Taxes Work with FAVR

  • Compliant drivers (vehicle age + insurance minimums met + 5,000 miles minimum driven per year) → reimbursements are 100% tax-free.

  • Out-of-compliance drivers → Kliks checks monthly to see if part of your reimbursement is taxable.

Why?

The IRS sets a “safe harbor” mileage rate (CPM). If your FAVR reimbursement is more than what you would have received under the IRS rate, the extra amount may be taxable.

Example 1: Tax Liability (February, 500 miles)

  1. FAVR Reimbursement = $407 (fixed) + $100 (variable: $0.20 × 500 mi) = $507

  2. IRS CPM Equivalent = 500 × $0.655 = $327.50

  3. Difference = $507 – $327.50 = $179.50 taxable

✅ John owes taxes on $179.50 for February.

Example 2: No Tax Liability (March, 1,000 miles)

  1. FAVR Reimbursement = $407 (fixed) + $200 (variable: $0.20 × 1,000 mi) = $607

  2. IRS CPM Equivalent = 1,000 × $0.655 = $655

  3. Difference = $607 – $655 = –$48 (no tax)

✅ No tax owed in March, and the –$48 reduces John’s February liability.
Year-to-date liability = $179.50 – $48 = $131.50

? Bottom line: Being out of compliance doesn’t always mean you’ll owe taxes—it depends on how your reimbursements compare to the IRS rate month by month.

? Learn more: