These are the rules of the road when it comes to deducting automobile expenses on your taxes
If you’re an employee and you use your car for work, you may be entitled to write off some of your automobile expenses on your tax return, but only if you meet four conditions.
The four conditions
The first condition for auto expense deductibility is that you are normally required to work away from your employer’s place of business or in different places. Secondly, under your contract of employment, you are required to pay your own automobile expenses. Note that the Canada Revenue Agency’s position is that you are
not considered to have paid your own automobile expenses if your employer reimburses you (or you refuse a reimbursement or reasonable allowance from your employer.)
The third condition is that you don’t 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.”
What is reasonable? The Income Tax Act sets a maximum amount that an employer can pay an employee for the amount to be considered “reasonable” and, therefore, excluded from your income. For 2018, that limit is 55 cents per kilometre for the first 5,000 kilometres driven and 49 cents a kilometre after that. In the three territories, there is an additional four cents per kilometre allowed for travel.
The fourth condition is that you must have a copy of CRA Form T2200, Declaration of Conditions of Employment, which has been completed and signed by your employer.