CRA Vehicle Expenses: Here’s What You Can Claim
Whether you’re self-employed or a salaried employee, traveling in a personal vehicle has tax deduction benefits in Canada. If you’ve accurate documents and records showing the correct utilization of your vehicle, the CRA will help you claim these tax deduction benefits. Keep records of every vehicle expense incurred for business-related activities only.
Using a car for business tax deduction is an excellent way of saving yourself from paying huge taxes from your business.
“It is the duty of a good shepherd to shear his sheep, not to skin them.” ~ Tiberius
What are the CRA vehicle expenses for which you can claim deductions?
Here is the CRA business expenses list for which you, as a vehicle owner, can claim the deduction:
- Maintenance & repairs
- Vehicle insurance
- Fuel expenses such as gasoline, propane, oil
- Capital cost allowance
- The interest you paid to purchase your vehicle
- Registration and licensing fee
- Leasing cost, if eligible.
- Electricity cost for zero-emission vehicle
Can you claim for car expenses without receipts?
Having receipts is essential to claim for car or personal vehicle expenses. Calculating the mileage alone will not be sufficient to claim a tax deduction. It’s the business expenses incurred while driving kilometers that can be deducted. The expenses of owning a car, such as fuel, maintenance, loan interest, lease amount, and more, will require receipts as proof.
Owning Vs. leasing a vehicle
If you have the vehicle ownership, co-own, or lease a vehicle with another person, the limits of CCA and interests will still apply. A Lease definition is a contract with terms and conditions under which a party rents an asset to another party. CRA allows the same deduction for all the vehicle expenses, such as gas, license, oil, insurance, and parking costs.
You can also claim deductions for maintenance expenses, loan interest, or lease costs for the motor vehicle. Present all the receipts and other documents when CRA conducts an audit.
You can only deduct the business-related expenses if you use a vehicle for personal and business-related activities. You can also deduct your motor vehicle’s total parking fee and other business insurance expenses.
If you use a personal or small car in Canada, record the kilometers you drive for personal and business-related activities.
How to calculate motor vehicle expenses?
The simple method is tracking the rate per kilometer traveled. You maintain a log to track every kilometer you commute for business and pay vehicle expenses from your pocket. The CRA mileage rate as of 2023 for business-related vehicle usage is 68 cents per km for the first 5,000 Kilometers driven and 62 cents for every additional kilometer.
Another method is calculating a percentage of actual vehicle expenses. In this method, you’ll have to keep track of all the vehicle costs incurred directly or indirectly by your company. The percentage of actual deductible vehicle expense for the year is by dividing the kilometers traveled for business-related activities by the kilometers driven in total.
Calculating motor vehicle expenses [Example]
Kellsey owns a designer store and has a December 31 year-end. She uses a truck for her business.
- The following were noted for the tax year:
Miles drove to earn business income = 30,000
Total miles driven= 35,000
- Expenses were as follows:
License & registration fee: $120
Gas and oil= $2000
Maintenance and repair: $180
Total expense= $5000
- The expenses that can be deducted for her truck for the tax year:
30,000 business miles ÷ 35000 total kilometers x $5000 = $4285.7
Hence, the deductible business expense from the total vehicle expense is $4285.7
She also has a business parking fee and other vehicle expenses worth $200. Therefore, she can now claim a total of $4485.7
This is the simplest way of calculating the final amount of tax that you can claim for deduction while the CRA audit. It is quick, easy, and can be done at your fingertips.
What kind of cars can you claim tax deductions on?
As per CRA, you can claim deductions on four types of vehicles:
- Motor vehicle: It is a vehicle designed to run only on highways and streets.
- Passenger vehicle: A taxpayer owns a vehicle or leased one to carry passengers on highways or streets.
- Zero-emission vehicle: A vehicle (owned by a taxpayer) that is fully electric & powered by hydrogen. See the complete vehicle list to know the other conditions and limitations.
- Zero-emission passenger vehicle: A vehicle owned by a taxpayer and is included in class 54 (would otherwise be included in class 10 or 10.1)
The expense calculation depends on the type of vehicle you’re using. It will also depend on the vehicle’s seating capacity and for which business purpose, motor vehicle, or passenger vehicle was used.
Track your mileage
Tracking your mileage helps you save money by claiming it in tax deduction. Always record the specific kilometer traveled from point A to point B for business-related activities. You can use a paper logbook or a smartphone to track your trips’ mileage. This is the best way to claim or write off car expenses.
Using a smartphone to record the miles quickly is an excellent way of having an efficient and effective business process.
If you’re still unsure about the entire process of calculating, writing off car expenses, learning more about taxes on cars and approving your loan, and approving your loan, CarFast is the ultimate place to help you apply for your car loan.
Can I claim mileage as self-employed in Canada?
As a self-employed person in Canada, it is possible to claim mileage. You can only claim vehicle expenses when you prove the business-related use of your motor vehicle during the yearly tax audit.
Can I claim vehicle expenses from the CRA for all my trips?
You can only deduct vehicle expenses if you have all the supporting receipts showing the business use of your personal motor or passenger vehicle. Keep a record of the number of miles driven for business purposes.
What is Capital Cost Allowance (CCA)?
Capital Cost Allowance (CCA) is the depreciation method carried out for tax purposes. It can be deducted from the total income for claiming tax benefits.
How do I calculate travel expenses by car?
In the case of the cents per kilometer method, the simple method is to multiply the business kilometers driven by the CRA rates. You can also calculate it by using the vehicle expense method, i.e. (kilometers driven for business purposes / total kilometers driven for the year X total vehicle expense).
What is the rate for travel expenses by car?
The CRA mileage rate as of 2023 for business-related vehicle usage is 68 cents per km for the first 5,000 Kilometers driven and 62 cents for every additional kilometer.