Mileage Reimbursement For Employees

Mileage Reimbursement For Employees

If you are an employee in Canada, you may be allowed tax free reimbursement by your employer for work-related vehicle expenses.  If you do not receive reimbursement for vehicle related work expenses then you may also be eligible to deduct your car expenses from your personal tax return.

What you can receive a mileage reimbursement for:

If you use your own car for your work-related activities. Some examples of business-related expenses that you may deduct include:

• Attending meetings or conferences away from your usual place of work.
• Collecting or delivering items.
• Commuting from your workplace or home to a client’s office or worksite.

Generally, travel from home to work is not eligible for mileage reimbursement in Canada.

CRA automobile allowance rates:

The current CRA automobile allowance rates for 2022 are:

• 61 cents per kilometre for the first 5,000km driven.
• 55 cents per kilometre after that.

If you’re reimbursed at a different rate than the CRA automobile allowance rate, you may pay income, pension and insurance contributions on your automobile allowance.

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Important Record Keeping:

If you are claiming an automobile allowance from your employer you will need to show your employer that you drove the kilometres you’re claiming reimbursement for. Common ways of keeping records of your business driving are through an automatic logbook mobile application, physical records or spreadsheets of work-related trips. When documenting business travel in your log book, be sure to log the following information that will be required by the CRA :
- Date
- Destination
- Purpose
- # of KM driven.

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Are automobile allowances taxable?

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To ensure your allowance is not taxed, ensure the following:

• You are reimbursed at the standard rate as per the CRA throughout the tax year.
• Your employer is not reimbursing you at a rate that is too high or low.
• Your employer is reimbursing you for the right expenses.
• You are not incorrectly deducting car expenses on your tax return which have already been reimbursed to you tax free.

That last thing you want is to be doing things incorrectly throughout the tax year and get slapped with a tax bill and penalty for not properly reporting your automobile expense information to the CRA.  

Reach out to our trusted professionals at Osman Accounting to ensure your tax filings are done right.

More details at Government of Canada website HERE