What are Allowable Motor Vehicle Expenses as an Employee?

By Randall Orser | Personal Income Tax

racing piggyMany people who are employees may have to use their personal vehicle for work, such as contractors, salespeople, and more. Many times the people do not get any kind of allowance from the employer for the use of their personal vehicle.

Sometimes the employer may reimburse them through either an allowance (which is a taxable benefit), or based on per kilometer driven for work. Whether an allowance or per kilometer basis, sometimes the amount received doesn’t cover the actual amount spent, so you can deduct the actual expenses earned less the amount received.

You can deduct your motor vehicle expenses if you 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; or, the allowance is unreasonably low.
  • You keep with your records a copy of Form T2200, Declaration of Conditions of Employment, which has been completed and signed by your employer.

The types of expenses you can deduct include:

  • fuel (gasoline, propane, oil);
  • maintenance and repairs;
  • insurance;
  • licence and registration fees;
  • capital cost allowance (though not recommended as it may trigger a gain if the vehicle is sold);
  • eligible interest you paid on a loan used to buy the motor vehicle (max $10 per day for vehicles bought after 2002); and
  • eligible leasing costs (amount limited based on a vehicle cost).

If you use a motor vehicle for both employment and personal use, you can deduct only the percentage of expenses related to earning income. To support the amount, you can deduct, keep a record of both the total kilometers you drove and the kilometers you drove to earn employment income. Canada Revenue Agency considers driving back and forth between home and work as personal use.

If you use more than one motor vehicle to earn employment income, calculate each vehicle’s expenses separately.

When you file your taxes, you enter these amounts in the Calculation of Allowable Motor Vehicle Expenses area on Form T777, Statement of Employment Expenses, and attach it to your paper return. If you file electronically, CRA doesn’t get this statement just the amount on Line 229.

As with any tax deduction, keep all your receipts, including payments from your employer for an allowance, and keep a log book of your kilometers driven for work related activities.

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