For most taxpayers there is little to no relief against the nearly unavoidable rising costs of fuel, which comes with the summer months. There is, however, some relief for taxpayers who drive for the purposes of work, excluding the costs associated with driving to and from the office each day.
If you are required, as part of your employment, to use a personal vehicle for work-related travel, such as visiting clients at their own home or place of business for meetings or other work-related activities, you may be able to claim some of your travel expenses on your tax return.
Before you can start to claim these expenses, it is important to note that your employer must certify that you were regularly required to work away from your place of business and that you are also required to pay your own expenses using a T2200 form.
Expenses that can be deducted from your net income include the following, so long as no tax-free allowance was received from your employer:
- Fuel (gas, diesel, propane or oil).
- Maintenance and repairs.
- Insurance.
- License and registration fees.
- Vehicle loan interest.
- Leasing costs.
- Depreciation.
You will most likely not be able to claim 100 per cent of these expenses, because most employees will use their vehicle for both business and personal use. As such, you will only be able to claim a portion of the above expenses when calculating your taxable income.
To determine what portion of your expenses can be claimed, you must keep a record of the kilometers driven for personal and business use and must also keep records of all of the vehicle expenses you have incurred.
Once year end rolls around, you must divide the total kilometers driven by the amount driven for employment purposes.
Percent of km driven for work = Business km / Total km
Once you have determined what portion of your kilometers were driven for business purposes, you can then multiply your costs for fuel, maintenance and repair, insurance, and license and registration fees by that amount.
You may have noted that three of the above expenses were not included in the above explanation. That is because vehicle loan interest, leasing costs and depreciation require special treatment. This information can be found on the Canada Revenue Agency (CRA) website.
IMPORTANT: In the past, taxpayers were also able to claim transit expenses. This was great for workers, and other taxpayers, who had access to public transit as an alternative to driving. Unfortunately, this credit is no longer available to any Canadian taxpayers.
For more information on claiming employment expenses or for help with tax planning to optimize your after tax position, contact us today!
