Deductible Mileage 101 (CAN)

If you drive your car for business or work purposes, you should track your kilometres. Why? Because it will save you money on your taxes. The more you drive, the more you’ll save.

The Canada Revenue Agency (CRA) allows you to write off business drives and permits you to use whichever reliable method you prefer to maintain your drive log. This includes a paper log book, an electronic spreadsheet template or a drive tracking application like MileIQ. 

Motor Vehicle Allowance

To calculate your allowance relief, track your business kilometres for the tax year and multiply it by the applicable rate.

The current CRA approved automobile allowance payment rates for 2023 are

  • 68¢ per kilometre for the first 5,000 kilometres driven; and
  • 62¢ per kilometre driven after that.

In the Northwest Territories, Yukon, and Nunavut, there is an additional 4¢ per kilometre allowed for travel.

Claiming Motor Vehicle Expenses on Your Tax Return

The way you claim motor vehicle expenses on your tax return depends on whether you’re self-employed or an employee.

Self-employed taxpayers: If you’re self-employed, you must file form T2125, Statement of Business or Professional Activities with your tax return (Form T1) to claim your motor vehicle expenses, along with all your deductible business expenses.

Employees: If you’re an employee, you may deduct your motor vehicle only if your employer completes and signs form T2200, Declaration of Employment Conditions. On this form your employer must certify that you were required to use your personal motor vehicle for employment purposes. The employer must also state whether you were paid an allowance or reimbursement for your vehicles expenses, and if so, how much. You do not need to file this form with your return. Keep it with your tax records in case the CRA asks for verification.

When you file your tax return, you claim your deduction for motor vehicle expenses by completing Form T777, Statement of Employment Expenses and including it with your return (Form T1). This form is used to claim all the deductible employee expenses you have, including motor vehicle expenses. 
See reference here: CRA - Motor Vehicle Expenses

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