Employment Expenses – Motor Vehicle Allowances Q&A

Employment Expenses – Motor Vehicle Allowances Q&A

Question: I was promoted at work and will receive a car allowance in my new position. Is this a taxable benefit? What do I need to track?

Answer:

It depends on the nature of the allowance that you will receive. The general rules are as follows.

Non-taxable benefits

If the automobile allowance is a “reasonable per-kilometer allowance,” it is not considered to be a taxable benefit. Allowances are considered to be reasonable if all of the following conditions apply:

·         The allowance is based on the number of business kilometres driven in the year.

·         Estimates are not acceptable.  A mileage log should be maintained to support the number of kilometers;

·         The rate per-kilometer is reasonable.

·         For 2019 this is $0.58/km up to $5,000 km, and $0.52/km thereafter, in all 10 provinces; and

·         You did not receive reimbursements for the same use of the vehicle

·         There are a few exceptions, including supplementary business insurance if applicable.

Taxable Benefits

If the automobile allowance does not meet the above requirements, then the amounts received may be considered to be taxable benefits. This includes flat rate allowances, and per-kilometer amounts that are higher or lower than the CRA prescribed rate for the tax year.

Automobile Expenses

If you received taxable motor vehicle allowances, you may be able to claim automobile expenses to help offset the increase in taxable income. Automobile expenses may be scrutinized by the Canada Revenue Agency (CRA) and the following conditions must all be met in order to make the claim.

·         You were in receipt of a taxable automobile allowance;

·         You are normally required to work away from your employer’s place of business or in different places;

·         You are required to pay for your own automobile expenses; and

·         Your employer signs a copy of form T2200, Declaration of Conditions of Employment to certify the conditions of your employment

Records

You should maintain a logbook in order to support your claim, a sample vehicle records and mileage log may be found on our website. The CRA requirements for motor vehicle expense may be found on their website.

Please note that mileage to and from your main place of employment or business are considered to be personal mileage.

 

* This communication is provided for educational purposes only and contains a general overview of the subject matter and is current as of the date of publication. The information should not be regarded as a substitute for professional advice. Clearly Financials Accounting Corporation accepts no responsibility for any loss or damage caused by your reliance on information contained in this publication. See www.clearlyfinancials.ca/news/disclaimer.

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