When employee must use vehicle to perform work duties
Question: If an employer requires an employee to use her own vehicle for work, what does the employer have to provide to compensate for wear and tear on a vehicle, if anything?
Answer: An employer is not required by any statute or regulation to pay all or part of an employee’s vehicle expenses. If that benefit is not negotiated as part of an employee’s employment contract, than the employee can claim a tax deduction for vehicle expenses if she meets all of the following conditions:
1.The employee is normally required to work away from the employer's place of business or in different places.
2. Under the employee's contract of employment, the employee has to pay his own motor vehicle expenses. An employee is not considered to have paid his own motor vehicle expenses if the employer reimburses him or if the employee refuses a reimbursement or reasonable allowance from the employer.
3.The employee 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-kilometre rate.
4.The employee keeps with his records a copy of Form T2200, Declaration of Conditions of Employment, which has been completed and signed by the employer.
The types of expenses an employee can deduct include:
• fuel (gasoline, propane, oil)
• maintenance and repairs
• insurance
• licence and registration fees
• capital cost allowance
• eligible interest paid on a loan used to buy the motor vehicle
• eligible leasing costs.
If an employer provides a flat rate vehicle allowance ( not based on the number of kilometres driven), that is a taxable benefit that is included in an employee’s income.
If an employee is reimbursed on a per-kilometre rate that the Canada Revenue Agency considers reasonable, that is not a taxable benefit, and the allowance is not included in income.
