The inevitable income tax season is upon us, and as overwhelming as it can be, it’s mandatory. If you drive for work, you may be eligible to claim a vehicle expense deduction on your tax return – read how now.
Interestingly, these potential deductions aren’t just for small business owners, they can be for anyone who uses their vehicle for work purposes. We’ve outlined exactly what’s required below.
How To Claim Your Vehicle Expense On Your Income Tax Return
Establishing IF You Are Eligible
According to the Government of Canada’s website, the Canada Revenue Agency (CRA) allows you to deduct vehicle expenses if you meet all the following requirements:
- You were normally required to work away from your employer’s place of business or in different places.
- You had to pay your own motor vehicle expenses under your contract of employment.
- You didn’t receive a non-taxable allowance for motor vehicle expenses.
- You keep with your records a copy of Form T2200, Declaration of Employment, which has been signed by your employer.
Deductions You Can Claim
The types of expenses you can deduct are:
- Gas receipts
- Maintenance and repairs expenses
- Licence and registration fees
- Capital cost allowance
- The eligible interest you paid on a loan used to buy the vehicle
- Eligible leasing costs
Important Dates Pertaining to Income Tax
The following are filing dates for 2020 taxes:
- Feb 22, 2021: Earliest you can file online
- Mar 1, 2021: Deadline to contribute to an RRSP, PRPP, or SPP
- Apr 30, 2021: Deadline to file your taxes
- Jun 15, 2021: Deadline to file your taxes if you or your spouse or common-law partner are self-employed
How to Keep Track
It’s important to note that if you use your vehicle for both work and personal use, you can only deduct a percentage of the expenses related to earned income. It is imperative that you keep a detailed log of the kilometers you drive for work purposes. Details that should be included in your log are the date, destination, purpose of the trip, and the distance travelled. Please keep in mind that the CRA considers driving from home to work as personal use.
Keeping track can get tricky, especially if you’re using your vehicle for personal and work use. Here’s a simple formula to help you calculate your vehicle expenses:
(Business kilometers/total kilometers) X total vehicle expenses = vehicle deduction