If you use your vehicle for any reason related to employment and work, you may be missing out on vehicle expense deductions you can claim when you file your taxes.
While it may not be possible to claim the entirety of your vehicle, there are certain factors you can consider to see if your vehicle expenses are eligible for tax deductions.
Are my vehicle expenses tax deductible?
Some vehicle expenses are tax deductible in Canada as long as you meet certain requirements. Either you must use your own personal vehicle for employment-related purposes or be responsible for expenses related to a company vehicle.
Employment-related purposes may include visiting and/or transporting clients and customers, attending business meeting off-site or traveling from your main job location to a temporary location.
If you use for vehicle for work-related purposes, then your vehicle expenses are tax deductible under the following circumstances:
- You are normally required to work away from your place of business or in different locations.
- You are required to pay for expenses under a contract with your employer. Exceptions to this would be if your employer pays for expenses, if you are reimbursed for expenses or if you refuse reimbursement.
- You did not receive a non-taxable allowance for expenses. This would be an amount given directly to you from the employer for vehicle expenses.
- You have a T2200 form (Declaration of Conditions of Employment) completed and signed by your employer.
If you receive a non-taxable vehicle allowance from your employer, yet the cost exceeds the allowance, you can claim the difference by voluntarily providing the CRA (Canada Revenue Agency) with the amount of allowance you received. You can then claim the difference.
What kind of vehicle expenses can I deduct?
If you meet the requirements for claiming your vehicle expenses on your tax return, you may be able to deduct:
- Fuel
- Maintenance and repairs
- Insurance
- License and registration fees
- Eligible interest on the vehicle loan
- Eligible leasing costs of the vehicle
You can also deduct what is called “capital cost allowance” (CCA). This means that, because you cannot deduct the total cost of your vehicle, you can claim part of the cost caused by depreciation.
How much of my vehicle expenses can I claim?
The amount you can claim depends entirely on whether or not the vehicle is used strictly for business purposes or if you use it personally as well. If the vehicle is used for employment and personal use, you can only claim the percentage of expenses related to your job.
This will all be calculated on your tax return but you should track your total kilometers driven and the kilometers driven for work purposes. On your return, you will need to know these amounts for the entire tax year.
Also keep in mind that driving from home to work and from work to home is considered to be personal use. These kilometers are not claimable.
How do I claim my vehicle expenses on my tax return?
The first thing you’ll fill out is Form T777 (Statement of Employment Expenses), specifically lines 5-16 (Calculation of Allowable Motor Vehicle Expenses).
Enter the make, model and year of your car ad well as the total kilometers driven and the total kilometers driven for work during the last tax year.
You’ll end up with a total on line 16 which you can then enter in on line 9281 of the form. Complete the rest of Form T777 – line 9368 is the total you will enter on line 229 of your return.
Not sure if your vehicle expenses are tax deductible? We can help! Contact us today for more information.