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How Do I Claim a Vehicle Expense for Work or Self-Employment?
How Do I Claim a Vehicle Expense for Work or Self-Employment?

If you use your vehicle for work or self-employment, you can claim expenses to reduce taxable income. Here’s how:

Samuel Jones avatar
Written by Samuel Jones
Updated over 2 months ago

Who Can Claim Vehicle Expenses?

You can claim vehicle expenses if:

  • You use your vehicle for work-related tasks or self-employment.

  • Your employer requires you to use your vehicle, and you have a signed T2200 or T2200S form (Declaration of Conditions of Employment) if you're an employee.

  • You are self-employed and use the vehicle to carry out your business activities.

Eligible Vehicle Expenses

You can claim the following vehicle-related costs proportional to the business or work-related use of the vehicle:

  • Fuel and Oil

  • Maintenance and Repairs

  • Insurance

  • License and Registration Fees

  • Loan Interest: If the vehicle was financed, you can claim interest paid on the loan.

  • Leasing Costs: For leased vehicles, claim monthly lease payments within CRA limits.

  • Depreciation (CCA): Self-employed individuals can claim the depreciation of the vehicle under the Capital Cost Allowance (CCA).

Ineligible Vehicle Expenses

  • Commuting costs between your home and regular workplace

  • Personal use of the vehicle, unless incidental to business use

How to Calculate Business Use of Your Vehicle

  1. Track Kilometers Driven:

    • Record the total kilometers driven during the year.

    • Record the kilometers driven specifically for work or business purposes.

  2. Determine Business Use Percentage:

    • Calculate the percentage of kilometers used for work or business by dividing the business kilometers by the total kilometers.

    • Example: If you drove 20,000 km total, and 5,000 km were for business, your business use percentage is 5,000 / 20,000 = 25%.

  3. Apply the Percentage to Expenses:

    • Multiply the business use percentage by the total vehicle expenses to calculate the deductible amount.

Documentation You Need

  • Keep a detailed logbook of your trips, including dates, destinations, purpose, and kilometers driven.

  • Save all receipts and invoices for vehicle-related expenses.

  • For leased or financed vehicles, retain a copy of your lease agreement or loan documentation.

How to Claim in CloudTax

  1. Enter Your Vehicle Details:

    • Use the Employment Expenses (T777) form for work-related claims (employees).

    • Use the Business Expenses (T2125) form for self-employment claims.

  2. Input Your Expenses:

    • Provide the total kilometers driven and the business kilometers.

    • Enter your vehicle expenses as prompted.

  3. Save Your Records:

    • Keep all supporting documentation for at least six years, as the CRA may request verification.

Why This Matters

Claiming vehicle expenses correctly ensures you maximize your deductions while staying compliant with CRA rules. Proper record-keeping and accurate calculations help you avoid penalties and make the most of your tax return.

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