Employment & Employees, Vehicles

Employment Expenses: What Motor Vehicle Expenses Can You Claim?

If you had to pay motor vehicle expenses under your employment contract, your employer might provide you with a signed T2200 Declaration of Condition Of Employment.  The form lists the vehicle expenses your employer approved that were necessary to perform your job. Although you don’t file the T2200, you must keep a record of it in case CRA requests a copy. You must file the T777 Statement of Employment Expenses form with your tax return to calculate your allowable expenses.

Eligibility

You can claim motor vehicle expenses if you had to work away from your employer’s workplace or work at multiple places under your contract. Keep in mind that the travel from your home to the main employer’s workplace is considered a personal expense and cannot be claimed as an employment expense.

Who can claim motor vehicle expenses?

Salaried, Commissioned, and Transport employees such as long haul trucker can claim their motor vehicle expenses that are specified in their contract. Each of these types of employment has specified conditions to allow the claim.

What are the expenses I can claim for my vehicle?

You can claim any of the following expenses only if they are approved by your employer:

  • fuel (gasoline, propane, oil)
  • maintenance and repairs
  • insurance
  • license and registration fees
  • capital cost allowance (CCA)
  • eligible interest you paid on a loan used to buy the motor vehicle
  • eligible leasing costs

Whether you owned or leased your vehicle, you can claim the interest on the money you borrowed to buy or lease it. Take the lower of the following amounts:

  • total interest paid in the year
  • $10.00 x the number of days for which interest was paid

How do I claim the vehicle expenses related to work if I use the same vehicle for personal use?

You deduct the percentage of your motor vehicle expenses that relate to your work. You need to keep a logbook of the mileage you drove to earn income and the total mileage you drove in the tax year for both work and personal use.

For example;

If you drove your vehicle for 25000 km to earn income, while the odometer shows that you drove the car for 40000 km in total in the last year; your work percentage = 25000/ 40000 = 62.5%. This means you can claim 62.5% of the total expenses including any CCA.

Not all expenses have to be prorated. Although general repairs and maintenance have to be prorated, repairs related to an accident while you were working can be fully deducted.

What is the Capital Cost Allowance I can claim?

If you own your vehicle, you can claim a percentage of the vehicle’s depreciation value that is related to your work. To find the CCA of your vehicle, you will need to find the CCA class first.

For example;

Ben bought a passenger vehicle for $30,000 including taxes last year:

  • His CCA class is 10 which has a rate of 30% = $9,000
  • He claims ½ of the CCA in the first year = ½ x 30% x $30,000 = $4,500
  • Next year he can claim 30% x ($30,000 – $4,500) = $7,650

However, if Ben uses the vehicle at a rate of 25% to earn income, he claims 25% x $4,500 = $1,125 only in the first year, etc.

How much can I claim if I am leasing my vehicle?

According to CRA, there is a maximum limit of the leasing cost you can claim under employment expense. This condition was put in place to prevent employees from claiming the full cost of luxury vehicles.

Since allowable vehicle expenses are similar to those claimed by self-employees, visit this TurboTax article for more information: “What Motor Vehicle Expenses Can Self-Employed Claim?”.

I use multiple vehicles for the same job, can I combine the expense?

No. You calculate the expenses for each vehicle separately. Since the percentage of use is different from one vehicle to another, you will not be able to combine the expenses.

My wife and I use the same vehicle to earn income. Can we both claim the full CCA on our tax returns?

No. Each has to claim the portion of expenses and CCA related to their use to earn income. The total amount from both tax returns cannot be more than the amount that would be allowed if one person is using the vehicle.

This is why it is highly recommended to keep records of all expenses and mileages used for work.

My employer reimbursed me for some of the vehicle expenses, can I still claim the remainder of the expenses?

Yes. If your employer reimbursed you by paying you a taxable benefit that is reported on your income tax slip (Box 40 of your T4 slip), you can claim the full expenses.

If your employer pays you a non-taxable benefit that is not reported on your income tax slip, you have to deduct this amount from your total vehicle expense.

Can I claim a rebate for the GST/HST paid on the expenses?

Yes. If you paid GST/HST on the vehicle expenses, you may be able to get a rebate of the GST or HST you paid on these expenses. Complete the GST370, Employee and Partner GST/HST Rebate Application, and claim the rebate on line 45700 of your income tax and benefit return.

TurboTax software offers an easy step-by-step guide to report your employment expenses and file related forms. Consider TurboTax Live Assist & Review if you need further guidance, and get unlimited help and advice as you do your taxes, plus a final review before you file. Or, choose TurboTax Live Full Service* and have one of our tax experts do your return from start to finish.

*TurboTax Live™ Full Service is not available in Quebec.