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It pays to claim your vehicle expenses

We all want a healthy tax refund, claiming your vehicle expenses could make a big difference. If you’re using your personal vehicle for business purposes, you may be able to claim a couple of extra thousand dollars on your personal income tax return.

In order to even consider deducting your motor vehicle expenses, the Canada Revenue Agency states that you must meet all of the following conditions:

  • You were normally required to work away from your employer’s place of business or in different places.

  • Under your contract of employment, you had to pay your own motor vehicle expenses.

  • You did not receive a non-taxable allowance for motor vehicle expenses.

  • You keep with all your automobile expense records a copy of your T2200 which is a Declaration of Conditions of Employment, which must be given to you by your employer; completed and signed each year.

If all of these conditions apply to your situation, you are eligible to make that additional claim for automobile expenses to reduce your taxable income for the year. Sometimes your employer will pay you a monthly allowance for using your personal vehicle for business purposes. Even thought they are providing an allowance, you must continue to maintain your travel log on a daily basis. You then get a T2200 from your employer that allows you to claim your automobile expenses less the allowance you've received from them. Basically you’re claiming the differential and this is all based on your kilometers traveled for business versus the total kilometers you've traveled throughout the year. The Canada Revenue Agency, allows you can claim that ratio, specific to the amount of kilometers you've travelled for business in the course of the year in relation to the number of kilometers you've travelled overall for the following items:

  • fuel (gasoline, propane, oil)

  • maintenance and repairs and car washes

  • insurance

  • license and registration fees

  • capital cost allowance, if you own the vehicle

  • eligible interest you paid on a loan used to buy the motor vehicle; and

  • eligible leasing costs

Once you've calculated the cost and mileage for the year, you deduct the amount your employer has given you throughout the year as a travel allowance & that remaining amount can be claimed on your T1 tax return. For example let’s say your travel allowance was $200 a month. Depending on your calculated automobile spending for work, once you deduct $2,400 at end of year from your vehicle costs, you might be able to claim an extra $1500 or $2000 dollars on your personal tax return, assuming your overall business mileage costs were approximately $3,900 - $4,400.00 for the year. Getting that extra bit of money when you claim taxes at the end of the year is as simple as keeping track of how much you drive for business vs. total kilometers. All you need is your data (mileage, costs, etc.), a calculator (depending on your math skills), a T2200 from your employer & you could be seeing a little more green come Spring. *Please remember, if you’re using more than one vehicle to earn employment income, calculate the expense of each vehicle separately.

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