Use your vehicle for work?
Whether you use your own car or a company car, it is important that you keep detailed records. This means putting pencil to paper. The CRA requires that you have a log book or a similar means as evidence of the business use of a vehicle. With evidence, the CRA will simply assume that all the usage was personal.
Keep a detailed logbook
You are personally responsible for keeping the records to support your vehicle expense claim. You should write down how many kilometres you drive for business, where you are going, the nature of the trip and expenses along the way.
When you drive your own care for work
If you are a business owner, a partner or an employee and use your personal vehicle for work, you can claim tax deductions if you meet the following criteria
- You are regularly required to work away from the office such as visit clients or take meetings in other cities and;
- You pay the costs of work-related travel out of your pocket. You will have to get your employer to sign a T2200 form confirming this.
If both apply, you will be eligible for deductions related to costs incurred while driving for work including gas, insurance, registration fees, repairs plus a percentage of lease payment or capital cost of a car and interest paid on a loan to but it.
How much you are eligible to deduct comes back to maintaining a detailed travel log.
When you get paid to drive your own car
If you are reimbursed for your actual business-related expenses, or your employer pays you a vehicle allowance, you can’t claim vehicle expenses. The allowance must be based on a reasonable rate per kilometres for it to be considered tax free. The rates for 2016 and 2017 are:
$0.54 for the first 5,000km driven for business
$0.48 per kilometre driven after that
$0.04 additional if in the Northwest Territories, Yukon or Nunavut.
If your actual expenses are more than your allowance, include the tax-free allowance in your income and then deduct the actual expense.
When you drive a company car
If your employer provides you with a car, you may receive two taxable benefits:
2% of the original cost of the vehicle or 66.66% of the lease costs, including PST and GST\HST for each month of the year you have access to the company owned vehicle. This taxable benefit can be reduced if you can prove you use the vehicle for business more than 50% of the time. If you only use the vehicle for work and leave it at the office at the end of the day, this charge can be waived.
This reflects the personal portion of any operating expenses paid by your company. It Is calculated at $0.26 per personal use kilometre less any costs you’ve reimbursed to the company. You can bypass this charge by completely reimbursing your employer for all car related expenses.
When you are self-employed
If you are self-employed, you calculate your expenses the same way as if your drive your own care for work expect you don’t have an employer to sign off on it. You are still expected to keep a detailed logbook and calculate your expenses based on the total kilometres you drove during the year and the total you drove for business purposes.
We provide log books for all our clients. If you need one, contact our office at 403.269.2662