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Employee-owned Vehicle

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Business -> Automobiles, Passenger Vehicles and Motor Vehicles -> Employee-owned motor vehicles

Employee-Owned Motor Vehicles

If an employee-owned motor vehicle is used for travelling in the performance of the duties of employment, then:

(i)    a reasonable allowance may be paid to the employee on a tax-free basis for the use of the vehicle, or 

(ii)    the employer can reimburse the employee for the business use of the vehicle, based on submitted receipts, or

(iii)    the motor vehicle expenses may be deducted by the employee on their tax return (Income Tax Act s. 8(1)(f), (h.1)) if the employee:

bulletwas normally required to carry on the duties of employment away from the employer's place of business, or in different places, and
bulletwas required under the contract of employment to pay motor vehicle expenses incurred in the performance of the duties of employment, and
bulletdid not receive any allowance or reimbursement from the employer for motor vehicle expenses that was not included in the employee's income.

Form T2200, Declaration of Conditions of Employment, must be completed by the employer in order for the employee to claim these expenses.

Reimbursements or allowances paid by the employer to the employee can be deducted by the employer.  These payments need not be reported on a tax return by the employee, unless the allowance does not fit the definition of reasonable allowance.  Employers - see also GST/HST Input Tax Credits on Motor Vehicle Allowances.

Other resources

All topics related to vehicles and business

Employee Motor Vehicle Travel Expenses

Canada Revenue Agency interpretation bulletin IT-522R - Vehicle, Travel and Sales Expenses of Employees (Archived)

Tax Tips:

A reasonable per-kilometre allowance is tax-free, and is the easiest method for an employee to recover vehicle expenses.

Employees deducting vehicle expenses on their tax return must track vehicle kilometres and vehicle expenses for the entire year.

Revised: September 19, 2017

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