You can deduct your motor vehicle expenses if you meet all of the following conditions:
- You were normally required to work away from your employer’s place or business or in different places.
- Under your contract of employment, you had to pay your own motor vehicle expenses.
- You did not receive a non-taxable allowance for motor vehicle expenses. Generally, an allowance is non-taxable when it is based solely on a reasonable per-kilometer rate.
- You keep with your records a copy of Form T2200, Declaration of Conditions of Employment that has been completed and signed by your employer.
The types of expenses you can deduct include:
- Fuel (gasoline, propane, oil);
- Maintenance and repairs;
- License and registration fees;
- Capital cost allowance;
- Eligible interest you paid on a loan used to buy the motor vehicle; and
- Eligible leasing costs.
Sometimes, your employer will include an unreasonably low allowance as income on your T4 slip even though you do not want to claim any expenses. When this happens, have your employer complete and sign Form T2200, or get a letter from your employer stating that the allowance was unreasonably low. Enter this amount on line 229 of your return.
If you use a motor vehicle for both employment and personal use, you can deduct only the percentage of expenses related to earning income. To support the amount you can deduct, keep a record of both the total kilometers you drove and the kilometers you drove to earn employment income. We consider driving back and forth between home and work as personal use.
If you use more than one motor vehicle to earn employment income, calculate each vehicle’s expenses separately.