How To Claim Mileage on Taxes in Canada

Whether you’re an employee or a self-employed person who uses a vehicle for employment or business purposes, you may be eligible to deduct mileage on your tax return. 

Expenses incurred for travelling to clients’ sites, meeting customers, attending events, or performing work-related tasks qualify as tax deductions. You can also claim your vehicle’s operating expenses, which we’ll cover in the next section.

However, if your employer reimburses you for work-related expenses or you use the vehicle solely for personal purposes or office/work commutes, you can’t claim mileage on your tax return.

What is a mileage claim?

A mileage claim is a tax deduction you receive for using your vehicle for business or work purposes. It helps you claim operating vehicle expenses, including gas or electricity for electric vehicles, repairs and maintenance, Capital Cost Allowance (CCA), insurance, leasing, licensing and registration, and interest on loans.

When using your vehicle for personal and business purposes, you can only deduct the portion of your vehicle expenses incurred due to business or work activities.

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How to claim mileage on taxes

The CRA provides the following methods to deduct your car mileage and make the most of your tax deductions.

Employees

To determine how much car expenses you can claim as an employee, divide your work-related kilometres by the total kilometres you’ve driven that year. Apply this percentage to the total expenses incurred to calculate your claim. 

If you receive non-taxable allowance or reimbursement from your employer, it’s not added to your income. So, you must deduct this amount from your mileage claim.

Here’s the formula:

Eligible car expenses = ((work-related kilometres / total kilometres) * annual vehicle expenses) - Non-taxable allowance or reimbursement from employer

Example

In 2023, you used your car for work and personal travel. 

Out of the 10,000 kilometres driven, 4,000 kilometres were work-related. 

During the year, you incurred the following expenses:

Gas: $2,500

Repairs and maintenance: $1,000

Insurance: $3,000 

Total expenses: $6,500

Your employer also offered $500 as non-taxable vehicle allowance for the year. 

Using the above formula, ((4,000 / 10,000 ) * $6,500) - 500, you’ll be claiming mileage of $2,100.  

Read this article to know more about the tax implications of using your vehicle for work.

Self-employed

You can choose between the full and simplified logbook method to claim mileage.

Full logbook method

This method requires you to track the details of your business trips in a logbook. You need to include the date of the trip, the purpose of the trip, your destination, and the number of kilometres driven for each trip.
You must also record your car’s odometer reading at the beginning and end of the year to accurately determine your total kilometres driven in a year. 

You can calculate the business use of your vehicle:

((business kilometres / total kilometres) * 100). 

Then, multiply the percentage by your total expenses.

Example

Let’s say your vehicle’s operating expenses were $5,000 in 2023.
Out of the 10,000 kilometres driven, 6,000 kilometres were for business. 
Your business use of the vehicle was 60% ((6,000 / 10,000) * 100).

Therefore, your mileage claim for 2023 will be $3,000 (60% * $5,000).

Simplified logbook method

To be eligible to use this method, you must follow the full logbook method for one year, which will act as the base year for calculating your annual business use of vehicle for the following year(s).

Then, maintain a logbook for a sample period of three months and calculate the annual business use of your vehicle with the following formula: 

(Sample year period % / Base year period %) * Base year annual %)

You can use this method if the calculated percentage is within the 10% range of the base year annual percentage. Otherwise, you must maintain a logbook for a new base year.

Example

Evelyn maintained a full logbook for one year and noted that her vehicle’s annual business use was 50% for the year 2022. 

The business use of her vehicle for each quarter (period) in 2022 was:

Q1: 48%
Q2: 51%
Q3: 45%
Q4: 55%

In 2023, she chose Q1 as her sample period, where her business use of vehicle was 52%. 

Evelyn calculated her annual business portion of the vehicle to be around 54% ((52% / 48%)* 50%).

Since 54% is within the CRA’s 10% threshold of the base year annual percentage of 50%, she can claim mileage using the simplified method.

Note: If you’re unsure which method suits you, consider maintaining mileage records using both methods and pick the one that helps you claim more mileage.

Recordkeeping of your mileage and vehicle expenses 

Whether you’re an employee or are self-employed, you must maintain proper records of your vehicle expenses and total kilometres driven to claim car mileage. Also, you must keep separate records of your business and personal kilometres to claim deductions accurately.

These records are for your reference and shouldn’t be submitted with your tax forms. However, keeping your receipts to support your claims for any potential Canada Revenue Agency (CRA) audits is crucial. You need to keep records for six years.

Where to claim mileage on your tax return

Both employees and self-employed workers must enter their vehicle expenses, business kilometres, and total kilometres driven in a year using the following forms. 

Employees

To determine how much you can claim, fill out Line 3 (Calculation of allowable motor vehicle expenses) in Form T777 (Statement of Employment Expenses).

Then report them on line 22900 of your income tax return. If you plan to claim any capital cost allowances, enter the applicable information in Part A or Part B of the form.

Keep your vehicle information (year, make, and model), total and work kilometres driven, and vehicle expenses handy to speed up the process.

Self-employed

Self-employed people must use Form T2125 (Statement of Business or Professional Activities) to determine their allowable motor vehicle expenses. For Quebec, use Form TP-80-V. 

Enter your information, including business and total kilometres driven in a year and your vehicle expenses, in Chart A – Motor Vehicle Expenses on the form.

If you’re claiming capital cost allowance on your vehicle, use Area A on the same form to calculate your CCA deduction for that year. Make sure to include this form with your tax return.

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