Vehicle expenses may be claimed primarily as a deduction from self-employment income or as an employment expense by taxpayers satisfying certain criteria. These are the most common instances, although there are others, such as certain medical or moving claims.

If you use your car for business purposes concerning self-employment income or as an employee, you may in general claim the portion of expenses attributable to business purposes, including capital cost allowance (depreciation) or lease costs. There are restrictions on deductions for capital cost allowance, lease payments, interest payments and other vehicle related expenses. There are also restrictions on what is considered business usage: for example, daily travel to and from a place of business is generally not deductible. Documentation required includes receipts, mileage logs, and - for employees - a "Declaration of Conditions of Employment Form" (T2200) provided and completed by their employer.

Employees who receive a car allowance may or may not have to include it in their income, depending on the nature of business and the amount and purpose of the allowance. Vehicle expense claims are not restricted by the existence or amount of commission income indicated on the T4 or T4A slips, but a completed T2200 (mentioned above) is a must. Employees and partners are also entitled to a GST rebate on some of their auto expenses, as well as other employment/partnership expenses.

Perhaps the best materials available for further information on vehicle expenses are the yearly Revenue Canada publications entitled "Business and Professional Income" (form T4002(E)) and "Employment Expenses" (form T4044(E)). These publications can be ordered free of charge by dialing Revenue Canada's "Request for Forms" number (see the government listings in your local telephone book. For the Ottawa area dial 1-800-959-2221.

The above provides general information only. It should not be regarded or relied upon as accounting or taxation advice or opinions. Logan Katz LLP Chartered Accountants would be pleased to provide more information or specific advice on matters of interest to you.
 

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