# T2200 and Commissioned Salesperson - Auto Expenses



## Canadian_Traveller (Feb 8, 2013)

Hi,

I have just taken on a role as a commissioned salesperson and my company provides a T2200 along with a taxable car allowance(600/month)

My question is, if I rent a car instead of purchasing/leasing, I assume I can also write this off? 

Given it is a rental car, do I also need to keep mileage logs and such? I mean the cost never goes up or down, I am looking at doing 30 day rentals for now until I figure out what I am going to do long term.

I can get a rental car for about 650 a month taxes in with unlimited kilometers. To me this is looking a lot cheaper than most other options given I am think I will be driving about 40,000 km / year. I will note that my wife and I have a single vehicle now but I need to find something to use with my new job.(2nd vehicle)

Anyhow, what are your thoughts? My accountant told me to just submit the expense for the rental car and not bother doing mileage logs since it is just a rental car and we can't really be subject to write down limits an such...I just am looking for a second opinion.

Thanks!


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## Charlie (May 20, 2011)

Monthly rental is not much different than monthly lease in this case. You'll have to apportion business/personal. Possibly you can do it on a basis other than mileage, but CRA much prefers mileage.

With $7K 'rent', plus insurance plus gas, you can bet you'll have a desk audit at some point.


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## Eclectic12 (Oct 20, 2010)

I find it an odd recommendation from the accountant plus am not clear on what not "being subject to write down limits" means.

CRA says:


> A proposal to disallow a portion of a claim for vehicle expenses would only occur where the claimed travel seems out of proportion in that overall context and is not supported by sufficient evidence as described here. However, it should be noted that *individuals will be responsible for providing sufficient evidence* to demonstrate the accuracy of their claims for business distances driven throughout the year.


http://www.cra-arc.gc.ca/whtsnw/lgbk-eng.html


Without a log book to show one is sticking within the rules, I'm not sure how one would provide evidence that the rental is only being used for business. 
I supposed one could provide one's schedule of sales calls but without some way of reconciling reasonable distances to the location against the mileage on the rental, it comes across as a hassle compared to a mileage log.

I've only had a mixed use car so I have no experience with what CRA would want for a business use only car. I've also never had a taxable car allowance.


Cheers


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## makemerich (Oct 1, 2015)

I would recommend keeping a log... in the event of CRA review/audit, they will bugger off quicker than without one.

CRA only takes two views for car expenses - owning and leasing. Renting the car would be the same as leasing the car in the eyes of the tax man. Leasing deductions are a PITA to calculate. See below for how the calculation works:

http://www.cra-arc.gc.ca/tx/ndvdls/.../ddctns/lns206-236/229/mtr/lsng/chrt-eng.html

The leasing cost calculated plus all other operating expenses (car rental insurance, gasoline, any maintenance) will need to be pro-rated based on your business vs total use.

The above is assuming the car allowance is included on your T4. If your employer does not put it on your T4 for whatever reason (which would be technically wrong) then you should net your gross costs against your allowance and then pro-rate.


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## fraser (May 15, 2010)

I believe that there is some misunderstanding. Either you accountant did not understand what you were saying, you did not understand his response, or your rental car will remain at the office during non business hours.

I had a T2020 for both auto for many years and home office. I have been audited three times. Two audits were standard desk audits in that I had to submit my auto expenses. The third was for a tax shelter and for auto expenses. Again it was documentation and receipts. No issue...CRA were simply doing their job and what we expect them to do. Fortunately no adjustments.

You do need to keep track of mileage. Keep a log. You also need to understand that the higher the percentage that you charge against commission income, the higher the chance that you will be audited. Mine was usually just below or just above the 50 percent mark. Plus we had a second car so that came into play. 

I was never asked, on any of the audits for a mileage log. Probably because my claim was reasonable. It I had been claiming 70 percent as business I strongly suspect that CRA would have challenged that (quite rightfully) and asked for backup.

What did I claim-everything. Gas, repairs, tires, insurance, auto club, car washes, depreciation (CCA), and interest expense. I would keep the car for 3-4 years and then 'sell' it to my spouse at the undepreciated balance-after a complete tune-up, tires, etc. of course.

You may not get audited in year 1 of your t2020, or year 2 or 3 but that does not mean that you are free and clear. If they audit in year 4 for instance, and then ask for years 3,2, and 1 you will know that they smell an adjustment/re-assessment. Don't make the HUGE mistake of assuming since they accepted say 55 percent business in year 1, that you can push it to 65 the next year and so on.


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