Place of employment is significant in determining whether you can deduct expenses related to owning and operating a vehicle to do your job.

However, to claim those deductions, your employer must sign form T2200 Statement of Conditions of Employment.

 

Calculating Your Claim Let’s say you own a van that your employer requires you to use for business purposes and you travel 27,000 kilometres to earn business income and 3,000 for personal uses.Here’s the year-end calculation of your travel-expense deduction:

Kilometres driven to earn business income  27,000
Kilometres for the year  30,000
Expenses:

$
License and registration 100
Fuel and oil 2,400
Insurance 1,900
Interest 800
Capital cost allowance 9,000
Maintenance and repair 200
Total 14,500
Deductible expenses:
27,000 divided by 30,000 times 14,500		 13,050

If your employer refuses to sign the form, you may still claim travel expenses if you can demonstrate that your employer required you to use your own vehicle.

Generally speaking, expenses for regular travel to work from your home aren’t deductible because Canada Revenue Agency (CRA) considers that personal use. On the other hand, travel expenses from your place of employment to carry out job responsibilities are deductible.

CRA defines place of employment as the location where a person regularly carries out job duties. This can be an office or a building where you regularly report to work, or it can be a jobsite or a customer’s place of business or home.

So, if you are a construction worker, your place of employment is where you regularly report until the project is completed. Because the travel involved is simply to and from your home, the travel expenses cannot be deducted.

Generally you may deduct travel expenses for using your own vehicle to:

  1. Call on customers;
  2. Travel to a special worksite and leave from your home because that shortens the trip, and
  3. Drive to several job sites each day or week when you don’t have a regular place of employment, particularly if you first go to your employer’s office or place of business.

The list of qualifying expenses is fairly extensive and includes fuel, oil, repairs and maintenance, insurance, license fees, interest costs on a vehicle loan, amortization expense for a purchased vehicle and lease payments.

If you think you qualify to claim the deductions, it is up to you — not your employer — to keep accurate records of each trip and its purpose. This is so you can substantiate the expenses if CRA conducts an audit.

Keep a logbook with the date, the number of kilometres travelled and the business purpose of each trip. When you file your tax return, the total expenses for the year will be pro-rated between the kilometres used for personal and employment purposes (number of kilometres of employment use divided by the total kilometres for the year).

Employment expenses also will be reduced by tax-free allowances or reimbursements you may receive from your employer. If the employer includes allowances or reimbursements in your income and reports them on a T4 slip, the expenses can be claimed in full.

In summary, you must meet four conditions in order to deduct the travel related expenses:

  1. Your employer must require that you pay those expenses;
  2. Your employer does not reimburse you and your are not entitled to reimbursement;
  3. The expenses are directly related to earning employment income, and
  4. Supplies, such as fuel and oil, are consumed directly in the performance of your job duties.

If you think you might be able to deduct job-related travel expenses, your tax accountant can help you calculate your deductions and keep you informed of potential restrictions on interest expense, amortization expense, and lease payments for some types of vehicles.

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