Does your FAVR program need to change after the mid-year IRS mileage rate increase?

Hey! I’m Erin from Cardata. With the IRS increasing the standard business mileage rate from 72.5 cents to 76 cents per mile effective July 1, you might be wondering whether your Fixed and Variable Rate (FAVR) program needs to change too.

The short answer: no.

FAVR isn't calculated using the IRS standard mileage rate. Instead, it reimburses employees for the real, business-required cost of owning and operating a personal vehicle for work in their area.

That includes fixed costs like:

• Insurance
• Depreciation
• Registration and licensing

And variable costs like:

• Fuel
• Maintenance
• Tires

This distinction is especially important with a mid-year rate increase.

The IRS adjusted its national mileage rate because driving costs changed faster than expected. But FAVR is already designed to account for changing vehicle costs over time, including factors like fuel prices.

So while a Cents-Per-Mile (CPM) program may need to be reviewed following the IRS rate change, a FAVR program doesn't need to increase simply because the IRS rate increased.

TL;DR

No. Your FAVR program doesn't need to change because the IRS mileage rate increased to 76 cents. FAVR uses actual ownership and operating cost data rather than a single national mileage rate, so it's already designed to stay aligned with changing driving costs.