Can I claim car payments and things like gas and car washes on my taxes? I'm not an Uber driver or anything, I just work for a non-profit and I use my car once or twice a month for work errands or to give co-workers rides to off-site meetings. I'm doing my own taxes and I don't want to get in trouble. – Matt, Montreal
If your boss counts on you to use your car for work, your tax deductions could add up. But there are plenty of catches.
"You can claim vehicle expenses for tax purposes if you're self-employed or if you're an employee who's required to spend your own money on expenses," said Gerry Vittoratos, a tax specialist with UFile. "This is typical for commissioned salespeople – say, I work for a software company, so I have to go on the road but my employer does not reimburse me for my vehicle expenses."
But taking your car when you go get Timbits for the office might not be enough. As an employee, you can't claim car expenses unless you're required to drive your car as a condition of employment – and your boss has to sign off on it.
"There has to be the understanding that you will be going out of the office from time to time – and the employer will sign a T2200 that will stipulate that," said Mario Brunetta, senior tax manager at BDO Canada LLP.
And you can't double dip – you can't claim car expenses if your company reimburses you for them or if they already pay you a "reasonable" car allowance.
So, can you claim car payments? Nope.
"If you've purchased your car, you can't claim your monthly payment, but you can claim interest on the loan," Vittoratos said. "If you lease, then you're allowed to claim your lease payment."
But that doesn't mean you're entirely out of luck if you bought your car – you can still claim capital cost allowance, better known as depreciation.
It's not actually how much your individual car has depreciated, it's a set percentage based on what you paid for it. It's 15 per cent of the price of your car, plus sales tax, for the year you buy your car. Then, it's 30 per cent on the remaining balance for every year after that.
So, if you paid $10,000 for your car, including tax – you'd claim $1,500 (15 per cent) the first year. The second year it would be 30 per cent of the $8,500 that's left (so, you'd claim $2,550) and so on.
But whether you bought or leased, there are limits on what you can claim.
"I can't go ahead and lease a $62,000 Mercedes E 300 and expect that they'll give me the full deduction," Vittoratos said. "That doesn't fly – they'll cap it to a lease payment on a vehicle that's worth about $30,000. If you pay anything beyond that, you can't claim it."
If you bought, there's also a $30,000 cap on the base amount you can claim for depreciation. So, the most you can claim for your starting amount on that Mercedes in Quebec is $34,492.50 ($30,000 plus GST and QST). That would mean you could claim $5173.80 that first year.
And although you can claim interest you paid on your car loan, there's a limit of $10 a day. And you can only claim what you actually paid.
"It comes out to $304 per month," Vittoratos said. "In today's interest-rate environment, it will be very rare to reach these numbers."
What else can you claim? Gas, insurance, registration fees, any maintenance, including oil changes and tire replacement, and repairs.
"If you've got to do your brakes, you can claim that – as long as you've spent it," Brunetta said. "But you have to have receipts for everything."
While you don't have to submit those receipts with your tax return, you'll need them if you're ever audited. And you should keep them for six years.
If you don't have receipts and made a ballpark guess on, say, what you spent on gas in 2016, anything you don't have receipts for could be rejected. You'll have to pay it back.
And can you actually claim car washes?
"They count as maintenance," Brunetta said.
Your mileage may vary
There's a big catch to all this. You can't claim anything you spent on personal use.
"All your expenses get prorated based on the percentage the car is used for the actual generating of income," Vittoratos said. "Which makes sense – the government isn't going to give you a tax break on the kilometres you drive for personal use."
So, if you're using your car 65 per cent of the time for work, you can only claim 65 per cent of your expenses.
And if it's only the occasional meeting, the percentage you can claim might be a lot lower.
To figure this out, you need to keep a logbook of all the kilometres that you drive for work.
"It has to be detailed and it has to be accurate – it has to show days worked, hours worked, where you're going and why," Vittoratos said. "There are even apps that do it for you – you press a button and it counts whatever mileage it's tracking on the GPS as business."
And what counts as business?
"It can be driving to meetings with clients or going on sales calls – any time you're going to get new business," Brunetta said.
That 40-km commute from home to the office doesn't count – unless you've stopped for a business trip in between.
"If you have to stop at a business location before you get to the office, all that travel becomes business travel," Brunetta said. "So you can maximize your business-related travel by scheduling appointments."
At the end of the year, you divide your total mileage, based on the odometer reading, by the business mileage in the logbook.
So, if 5,000 km of the 20,000 km you drove was for business, you can claim 25 per cent of your car expenses.
The Canada Revenue Agency (CRA) "doesn't have the staff" to pore through every single entry in your logbook to catch whether that Sunday grocery trip to Costco counts as work mileage because you bought coffee for the office, Vittoratos said.
"They'll take your word for it, but it has to be reasonable – they call it a reasonable expense," Vittoratos said. "The reasonability test will be: For that kind of job, does it make sense that you're on the road 95 per cent of the time? If you say 95 per cent, you'd better believe they will check you."
After you've logged your mileage for one full year, the CRA allows you to do just a three-month logbook for following years – as long as the amount is similar. But Vittoratos says that's a bad idea.
"I'm telling you right now – keep a detailed logbook every year," he said. "If the government thinks the percentage you're indicating is not reasonable, they can reject the claim."
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