Vehicle allowances and deductions can put you on a collision course with the taxman
The CRA is taking a closer look at Canadian’s automobile deductions to determine if they met the conditions for eligibility. Two cases this summer focused on whether the car allowance being paid by an employer was a reasonable per-kilometre rate to cover the actual operating costs of the “work” portion of usage. In both cases, the judge decided that it wasn’t reasonable because one was a fixed allowance and the other was an estimate, and thus not based on the actual number of kilometres for which the vehicle was driven. Therefore, the allowance could not be used as a deduction and the amount needed to be included in the taxpayer’s income.
“Automobile expenses continue to be an area of scrutiny for the taxman, so you shouldn’t be surprised if the Canada Revenue Agency starts asking you questions about how you may have claimed any vehicle expenses or employer’s travel allowances on your tax return.”