If you are required to use your motor vehicle for business or employment purposes, you are allowed to deduct reasonable expenses for operation and ownership of the vehicle such as fuel, oil, tires, licence fees, insurance, repairs and maintenance, depreciation, finance charges, and lease payments.  Your employer must certify the conditions of your employment on form T2200 Declaration of Conditions of Employment to verify your eligibility for a deduction. Administratively, the CRA does not require you to file the form with your tax return; however you must retain it in case they wish to see it.

The amount you are allowed to deduct is normally based on the proportion of kilometres you drive for business or employment purposes to your total kilometres for the year. Note that driving between your home and your normal place of business or employment is generally considered a personal trip.  To support your deduction, you should maintain a careful record of your business and employment kilometres driven for the year, including the date, destination, and distance driven for each business trip.

If you receive a reasonable per-kilometre allowance from your employer for the use of a business motor vehicle, the allowance is not included in your income, and you are not permitted to deduct your actual motor vehicle expenses. Where you receive both a reasonable per-kilometre allowance and a flat allowance, the entire amount must be included in your income, but you may deduct your actual expenses.

There are specific limits placed on the amount of depreciation, finance charges and lease payments you are allowed to deduct, and these limits change from year to year.

If you believe you may be eligible to claim automobile expenses on your personal income tax return, consult a Chartered Accountant to help you calculate your allowable deduction.

Information for Tax Tips is provided as a public service by the Chartered Accountants of British Columbia.