Learn How Vehicle Expenses Relate to Income Tax

The inevitable income tax season is upon us, and as overwhelming as it can be, it’s mandatory. If you drive for work, you may be eligible to claim a vehicle expense deduction on your tax return – read how now.

Interestingly, these potential deductions aren’t just for small business owners, they can be for anyone who uses their vehicle for work purposes. We’ve outlined exactly what’s required below.

How To Claim Your Vehicle Expense On Your Income Tax Return

Establishing IF You Are Eligible

According to the Government of Canada’s website, the Canada Revenue Agency (CRA) allows you to deduct vehicle expenses if you meet all the following requirements:

You were normally required to work away from your employer’s place of business or in different places.
You had to pay your own motor vehicle expenses under your contract of employment.
You didn’t receive a non-taxable allowance for motor vehicle expenses.
You keep with your records a copy of Form T2200, Declaration of Employment, which has been signed by your employer.

Deductions You Can Claim

The types of expenses you can deduct are:

Gas receipts
Maintenance and repairs expenses
Licence and registration fees
Insurance
Capital cost allowance
The eligible interest you paid on a loan used to buy the vehicle
Eligible leasing costs

Important Dates Pertaining to Income Tax

The following are filing dates for 2020 taxes:

Feb 22, 2021: Earliest you can file online
Mar 1, 2021: Deadline to contribute to an RRSP, PRPP, or SPP
Apr 30, 2021: Deadline to file your taxes
Jun 15, 2021: Deadline to file your taxes if you or your spouse or common-law partner are self-employed

How to Keep Track

It’s important to note that if you use your vehicle for both work and personal use, you can only deduct a percentage of the expenses related to earned income. It is imperative that you keep a detailed log of the kilometers you drive for work purposes. Details that should be included in your log are the date, destination, purpose of the trip, and the distance travelled. Please keep in mind that the CRA considers driving from home to work as personal use.

The Calculation:

Keeping track can get tricky, especially if you’re using your vehicle for personal and work use. Here’s a simple formula to help you calculate your vehicle expenses:

(Business kilometers/total kilometers) X total vehicle expenses = vehicle deduction

Remember, if you’re using your vehicle for work, keep track of your driving. We hope you found this information helpful and that you can benefit from it during income tax season.

Click here for an INSTANT Auto Quote »