How to Claim Gas on Taxes

Did you know that gas is just one of the many expenses you can deduct when using your vehicle for work-related purposes? From maintenance to insurance, there are numerous ways to maximize your deductions. Read on to find out how you can claim gas and other vehicle-related expenses.

How to claim gas expenses

To claim the fuel costs on your taxes, you must ensure that the expenses are directly related to your work and supported by proper documentation. Here's how to make sure you claim the correct amount:

• Save receipts: Keep all receipts for any gasoline, propane, or oil purchases you made throughout the year. You should store these receipts for up to six years after the end of the tax year to which they relate.
• Note odometer readings: Record the odometer readings at the start and end of the fiscal period for your vehicle. If you switch vehicles during the year, make sure to log the dates and the odometer readings of when you buy, sell, or trade vehicles.
• Maintain accurate records: Track the total kilometres driven and the kilometres driven for business purposes. For each business trip, note the date, destination, purpose, and distance covered. This record will help you calculate the percentage of your vehicle expenses that you can claim.

Let’s see how to maintain records for gas expenses accurately.

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Choose a mileage claim method

The Canada Revenue Agency (CRA) offers two methods for claiming your mileage:

To simplify the process, you can use a fully automated mileage tracking app.

While you need to keep most documents for six years after the tax year they relate to, you need to keep the full logbook for six years from the end of the tax year when you last used it to calculate your business use. 

For example, you kept a full logbook in 2023 to establish that 60% of your vehicle use is for business. If you use this 60% figure for the simplified logbook of 2024, you need to keep the full logbook of 2023 until 2031.

How to claim gas as a self-employed

To claim gas expenses as a self-employed person, you first need to determine the percentage of your vehicle use that was for business purposes.

Calculate the total kilometres you drove during the year and the kilometres driven for business purposes. If you drove a total of 15,000 kilometres during the year, and 7,500 of those were for business, your business use percentage is 50% (7500/15000). Apply this percentage to your gas expenses. For instance, if you spent $2,500 on gas, you could claim 50% of that amount, which equals $1,250.

When it’s time to file your taxes, you'll enter your gas and other vehicle expenses on line 9281 – Motor vehicle expenses (not including CCA) of Form T2125 (Statement of Business or Professional Activities). This line allows you to claim gas and other eligible vehicle costs such as maintenance, insurance, and lease payments.

Our self-employed mileage deduction guide can offer even more detail if you want to continue reading. 

How to claim gas as an employee

If you use a personal vehicle for work-related purposes as an employee, you have two options to claim expenses. 

Per kilometre rate

The CRA sets a standard per-kilometre rate that companies can use for employee mileage reimbursement:

• Provinces: 70 cents per kilometre for the first 5,000 kilometres and 64 cents for each additional kilometre. 
• Territories: 74 cents per kilometre for the first 5,000 kilometres and 68 cents for each additional kilometre. 

Example: Let's say Emily is an employee in Ontario, who uses her personal vehicle for work-related travel. She drove a total of 6,000 kilometres for work purposes. Here's how Emily calculates her reimbursement:

First 5,000 kilometres: 5,000 km × $0.70 = $3,500
Remaining 1,000 kilometres: 1,000 km × $0.64 = $640
Total reimbursement: $3,500 + $640 = $4,140

Note: The rates set by CRA are tax-exempt. If your employer reimburses you at a higher rate than those, you may be required to pay income, pension, and insurance contributions on the excess amount.

Flat rate vehicle allowance

If your employer provides a fixed, flat-rate allowance to cover vehicle expenses and adds it to your income, you can deduct the actual expenses on your tax return. You should meet all of the following conditions:

• As part of your employment duties, you were required to work away from your employer's main office or at various locations.
• You had to cover your own vehicle expenses according to your employment contract.
• You didn’t receive a non-taxable allowance for motor vehicle expenses (your employer didn't reimburse you on a per-kilometre basis).
• Your employer provided you with a copy of Form T2200 (Declaration of Conditions of Employment). This form verifies that you needed to use your vehicle for work purposes and were not fully reimbursed for those expenses.

If you fit the criteria, enter the vehicle expenses in the “Calculation of Allowable Motor Vehicle Expenses” area on Form T777, Statement of Employment Expenses, and attach it to your tax return.

Other tax deductions for vehicle expenses

Let’s look at the motor vehicle expenses that can help lower your taxable income. 

• License and registration fees: You can claim the annual amount you pay to register your vehicle with the provincial government, as well as your license fee.
• Maintenance and repairs: You can claim routine maintenance charges like tire rotations and oil changes, as well as unexpected repairs.
• Parking fees: If you incur parking fees, you can deduct the full amount related to your business activities. Always keep receipts to support your claims.
• Insurance costs: A portion of your vehicle insurance can be deducted based on the percentage of business use. For instance, if 50% of your vehicle use is for business, you can claim 50% of your insurance costs.
• Leasing expenses: If you lease a motor vehicle to earn business income as a self-employed person, you can claim the leasing costs on line 9281 of Form T2125. Employees can enter the eligible leasing costs on line 27 of Form T777.
• Electricity for zero-emission vehicles: If you drive a zero-emission vehicle (ZEV), you can claim the cost of electricity used for charging. 
• Eligible interest on a loan: You can claim the interest you paid on a loan to buy your vehicle. Employees need to enter the interest expense amount on line 26 of Form T777.
• Capital cost allowance: You can claim capital cost allowance (CCA) to deduct the depreciation of your vehicle over time. The amount you can claim depends on the type of vehicle and how much you use it for business.

Learn how to claim motor vehicle expenses step-by-step.

How different types of vehicles impact deductions

Let’s see how different vehicle categories can affect your tax deductions:

• Motor vehicles are designed for use on highways and streets, including trucks, vans, and some SUVs used primarily for transporting goods or equipment. Generally, you can deduct expenses like gas, maintenance, and insurance based on your business-use percentage without specific limits.
• Passenger vehicles are designed to carry no more than eight people, including most cars and station wagons. When you own or lease a passenger vehicle, there are certain limits on the amount you can deduct for CCA, interest expense, and leasing costs. 
• Zero-emission vehicles (ZEVs), such as electric or hydrogen-powered vehicles, make you eligible for special deductions. You can claim electricity costs for charging and may be eligible for higher CCA rates.

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