Motor Vehicle Expenses
You can deduct motor vehicle expenses if the vehicle is used for running a business or if you are required to use it for employment purposes as part of your job. Eligible motor vehicle expenses can be claimed on the following forms, depending on the nature of your income or activity:
Form T777 – Statement of Employment Expenses: For employees required to use their vehicle for work-related purposes and who receive a signed Form T2200 (Declaration of Conditions of Employment) from their employer.
Form T776 – Statement of Real Estate Rentals: For individuals earning income from rental properties who use their vehicle for rental-related activities.
Form T2125 – Statement of Business or Professional Activities: For self-employed individuals or business owners using their vehicle for business purposes.
Form T2042 – Statement of Farming Activities: For farmers using their vehicle in the course of farming operations.
Form T2121 – Statement of Fishing Activities: For individuals earning income from fishing and using their vehicle for related activities.
Form T1163 – Statement A: AgriStability and AgriInvest Programs Information: For farmers participating in AgriStability and AgriInvest programs.
Form T1273 – Statement of Farming Activities for Special Income Averaging: For eligible individuals engaged in farming operations and electing special income averaging.
What Expenses Can You Claim?
You can claim a percentage of the following vehicle expenses that relate to business use:
Fuel: Gasoline or diesel costs.
Insurance: The cost of insuring the vehicle.
Maintenance and Repairs: Routine servicing, oil changes, tire replacements, etc.
Registration and Licensing Fees: Expenses for legally operating the vehicle.
Parking: Work-related parking costs (e.g., attending client meetings).
Interest on Vehicle Loan: A portion of the interest on a loan for the vehicle, if applicable.
Leasing Costs: If leasing a vehicle, eligible leasing charges can be deducted.
Capital Cost Allowance (CCA): The cost of the vehicle can be used to calculate capital cost allowance.
Business Use vs. Personal Use
You can only deduct the portion of expenses corresponding to business use.
Example: If your vehicle is used 40% for business purposes, you can deduct 40% of your total vehicle expenses.
Logbook Requirement
To claim motor vehicle expenses, you must keep a detailed logbook of your work-related travel. This logbook is essential for substantiating your claim in the event of a CRA audit.
Your logbook should include:
Total Kilometers Driven: Record all kilometers driven during the year, including both personal and business use.
Business Kilometers Driven: For each business trip, note:
Personal Kilometers Driven: Track separately from business use.
Additional CRA Requirements in case of audit
Odometer Readings: Record the starting odometer reading at the beginning of the year, and the ending odometer reading at the end of the year to calculate the total kilometers driven.
Receipts and Invoices: Keep all receipts for fuel, repairs, insurance, etc., as supporting documents for your claim.
Important Notes
Commuting: You cannot claim expenses for commuting between your home and your regular workplace, as it is considered personal use.
Record Retention: Retain all records, including logbooks, receipts, and invoices, for at least seven years, as the CRA may request them during an audit.
Posted on 31 Dec 2024