# vehicle expenses, and how to find a tax accountant



## joncnca (Jul 12, 2009)

so i need to travel locally for work, and i receive a non-taxable per-kilometer allowance. the rate is much lower than the maximum allowed in the Income Tax Regulations (http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/tmbl/llwnc/nntx-eng.html).

i've heard of people suggesting that this rate may be "unreasonable" when you consider maintenance, registration, insurance, etc. in particular, this might be unreasonable if you consider CCA, particularly on a new car + finance loans.

from what i've read, it seems that if an allowance is not considered reasonable, the allowance can be included as a part of taxable income (http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/tmbl/llwnc/nntx-eng.html) (http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/tmbl/llwnc/klmtr-eng.html) and you calculate the actual eligible deduction, possibly based on the guideline rates/km in the Income Tax Regulations (54/48 cents). of course, then you have to pay CPP, EI, and income tax on the additional income...

after all is said and done, this is probably only tax efficient if you meet certain criteria, and probably only worthwhile for a relatively new car due to CCA, otherwise the tax deduction may not offset the increased payroll deductions...

any thoughts?

i guess...i could try to run some numbers, but i'm by no means an accountant. if i were to determine the feasibility of this, i'd want to consult a tax accountant. but how does one look for an accountant with experience with a particular issue? all accountants probably advertise their ability to deal with anything, but may not have experience with some situations. any advice with this?


----------



## Guban (Jul 5, 2011)

It seems like you have done the research into this, and have the basic facts. Why not use a tax program and run the numbers? I would suspect that most experienced accountants would be able to do this easily. 
Hope you have kept your receipts and a driving log.


----------



## Zeeshanbmerchant (Jan 4, 2014)

It shouldn't take a professional more then 10 minutes in excel to figure it out

Heck you could probably post the numbers in this thread and I'll run em for you


----------



## domelight (Oct 12, 2012)

1. If the allowance received is above 54 cents for the first 5000 km (48 cents thereafter and reset annually) then the amount above these thresholds is a taxable benefit to the recipient. Anything less is not.

2. if you can document the business use of your vehicle and all applicable expenses then you may be able to improve your situation.

3. So lets say that you add up all your vehicle costs and it comes to six grand for the year but your mileage allowance only gave you three thousand. Then you should ask your employer for a completed form T2200. Once this form is filled out and you submit the appropriate information in your tax return you should be able to claim the difference in your expenses as well recover the eligible HST on the difference.

4. This form is easily attainable through a google search and your employer should have no issues with filling it out and signing it for you.


----------



## Canadian (Sep 19, 2013)

When your friends use the word unreasonable they mean that the rate is too low, considering your costs.

When the CRA uses the word reasonable, they mean any rate below 54 cents per km for the first 5,000 km and 48 cents per km beyond is reasonable. Any amount per km above this is deemed unreasonable and is subject to tax, hence why it would be included in your income as a taxable benefit.

This isn't something you necessarily need to worry about in terms of a tax calculation. If your mileage compensation is greater than these amounts (and by the sounds of your OP, I don't think it is), then your employer will perform the necessary calculations and include the appropriate amounts on your T4.


----------



## Charlie (May 20, 2011)

My understanding was that even if your employer calculated a non-taxable 'reasonable' allowance, you had the option of including it in income and deducting your actual if they provided you with the T2200 condition of employment form certifying you had to use the car.

The software I used, CANTAX -- I think -- had a spot for the income inclusion on the auto schedule -- basically it reduced your claim by the amount you received. You'd have to support your business use and actual costs if asked. And you should make sure your insurance is consistent with your claim for business use.

If you're good calculating your auto expenses, you don't need an accountant to do this bit for you. And if you do need an accountant, any professional who is familiar with personal tax should be OK.


----------



## Canadian (Sep 19, 2013)

^ this is allowed but sometimes not worth it.

If the OP wants to calculate both scenarios, the rate for CPP is 4.95% of employment income to a max of $2,356 and EI is 1.88% of employment income to a max of $891.

You don't need to actually remit the increment to CRA - your tax software should incorporate it into the balance owing / refund.


----------



## joncnca (Jul 12, 2009)

Canadian said:


> ^ this is allowed but sometimes not worth it.
> 
> If the OP wants to calculate both scenarios, the rate for CPP is 4.95% of employment income to a max of $2,356 and EI is 1.88% of employment income to a max of $891.
> 
> You don't need to actually remit the increment to CRA - your tax software should incorporate it into the balance owing / refund.


Would the money tend to be considered employment income, or some other kind?

if i've already contributed the max for EI and CPP, doesn't that mean any additional income will not require additional contributions?


----------



## joncnca (Jul 12, 2009)

ok, so i've put together some of my numbers from my logs and here's what i have, and i realized i have some questions that i haven't found answers to yet:

1. I've received about $3,700 in non-taxable travel allowance based on graduated decreasing per-kilometer rate that is lower than the CRA posted of $0.54 for first 5000km and $0.48 thereafter.

2. If you use the CRA rate and the km that I drove specifically for work, it would be about $5,100.

3. Total fuel and maintenance costs (and other deductible expenses) is about $4,000.

4. Based on my odometer readings, about 85% of the km i put on the car are for business purposes.

so i would add $3700 to my income, i get that much. but i'm not sure where to enter the expenses...what line?

also, isn't the "reasonable" rate posted by CRA supposed to account for basically all expenses associated with business use, so it should include all fuel and other expenses, right? so the deduction should be $5100, right? where is this entered?

basically i'm not sure where the 'deduction' is entered.


----------



## Eclectic12 (Oct 20, 2010)

^^^^

Aren't the expenses entered on form T777 - Statement of Employment Expenses?

http://www.cra-arc.gc.ca/tx/ndvdls/...g/ddctns/lns206-236/229/slry/mtrvhcl-eng.html


Cheers


----------



## Guban (Jul 5, 2011)

joncnca said:


> ok, so i've put together some of my numbers from my logs and here's what i have, and i realized i have some questions that i haven't found answers to yet:
> 
> 1. I've received about $3,700 in non-taxable travel allowance based on graduated decreasing per-kilometer rate that is lower than the CRA posted of $0.54 for first 5000km and $0.48 thereafter.
> 
> ...


As eclectic has indicated, the figures are entered on T777, however, you can only use your personal numbers, not CRA's $5,100. If $4,000 is the total of your expenses, I note that 85% of this is less than what you were paid. 

CRA refers to "reasonable" as a normal amount per km. It's definition of unreasonable is a flat amount per week or month.


----------



## lb71 (Apr 3, 2009)

joncnca said:


> ok, so i've put together some of my numbers from my logs and here's what i have, and i realized i have some questions that i haven't found answers to yet:
> 
> 1. I've received about $3,700 in non-taxable travel allowance based on graduated decreasing per-kilometer rate that is lower than the CRA posted of $0.54 for first 5000km and $0.48 thereafter.
> 
> ...


#2 is irrelevant to calculating your expenses. 

#4 -- does the 85% include the travel from home to work and back? That cannot be included. You can only include travel away from work. (This assumes you have a main work location you go to regularly.)

#3 -- not sure if you included depreciation, but if it is a newer car, it can be worth quite a bit.

The CRA guide T4044 will provide you with a lot of information.


----------

