How does my car affect my reimbursement?
In most cases, you’ll be paid for your full fixed and variable expenses with no deductions regardless of the car you drive, based on your company’s standard vehicle profile (see below). But the car you actually drive may affect your gross or net reimbursements.
|Gross Reimbursement||Net Reimbursement|
|Your gross reimbursement is how much you’ll earn before taxes.||Your net reimbursement is how much you’ll earn after taxes.|
Standard vehicle profile
All drivers are assigned a “standard vehicle profile” by the company they work for.
Your reimbursement rates are based on the cost of owning the standard vehicle, not your personal vehicle. For example, if you own a Tesla and drive it for work, but your standard vehicle is based on a Hyundai, you will be reimbursed as if you drive a Hyundai.
Why your car may affect your reimbursement
Your reimbursement will be affected if the car you drive is not considered tax compliant, as per the FAVR tax rules. If any of the following applies to you, you may be out of compliance:
- Your vehicle is too old.
- Your vehicle has too many miles on it.
- You purchased your vehicle for less than 90% of the MSRP (manufacturer-suggested retail price) of your company’s standard vehicle. For example, if your company’s standard vehicle has an MSRP of $50,000, your vehicle must have cost at least $40,000 in order to be compliant.
If you are out of compliance, you will not be eligible for tax-free reimbursements. Your reimbursements will be impacted in one of two ways:
- Your net reimbursement
Throughout the quarter, you’ll collect your reimbursements in full. When the quarter comes to an end, your reimbursements will be tested for tax eligibility. If your car is out of compliance, you will be retroactively taxed for the quarter’s reimbursements.
- Your gross reimbursement
Your company may enforce an in-house age or odometer rule. In this case, your employer may choose to deduct funds from your reimbursement.