Hey there, fellow drivers! If you find yourself hitting the road for work-related or business purposes, here's a tip that can put a smile on your face - track your kilometers!
Why, you ask? Well, it's like finding hidden treasure in the form of tax savings. The more you drive, the more you keep in your pocket.
The Canada Revenue Agency (CRA) has your back on this. They've made it super easy for you to keep track of your driving adventures.
Whether you're old-school with a paper log book, tech-savvy with an electronic spreadsheet, or love using apps like MileIQ, the choice is yours!
Let's talk about the Motor Vehicle Allowance.
It's like a little reward for being diligent. All you have to do is keep tabs on your business kilometers throughout the tax year and then multiply it by the magic rate.
The current CRA-approved automobile allowance rates for 2023 are:
- 68¢ per kilometer for your first 5,000 kilometers driven
- 62¢ per kilometer for all those kilometers beyond the first 5,000
And if you're in the Northwest Territories, Yukon, or Nunavut, guess what? You get an extra 4¢ per kilometer for your travel adventures there!
Time to talk taxes!
How you claim those motor vehicle expenses on your tax return depends on whether you're your own boss or part of a bigger team.
If you're the boss of your own show (self-employed), then Form T2125, also known as the Statement of Business or Professional Activities, is your trusty sidekick. Bundle it up with your tax return (Form T1) to claim all your motor vehicle expenses and other awesome business deductions.
Now, if you're part of an amazing team (an employee), you're still in luck. You can deduct your motor vehicle expenses if your employer fills out Form T2200, the Declaration of Employment Conditions. This form basically says, "Hey, they needed to use their car for work stuff." Remember, no need to send in this form with your return. Just keep it safe in case the CRA wants to check it out later.
Okay, tax time warriors, when you're ready to file your return, grab Form T777, the Statement of Employment Expenses and include it with your return (Form T1). It's like your golden ticket to claiming all those sweet employee deductions, including those awesome motor vehicle expenses.
Keep rockin' the road and saving on your taxes!
For more details, you can check out the reference over at CRA - Motor Vehicle Expenses. Happy driving!