April 19, 2021

Is mileage reimbursement taxable income?

UPDATED SEP 24, 2021 • 3 MIN READ

This one is tricky as mileage reimbursement may or may not be taxed as income. Here we will quickly go over when your reimbursements for work-related car expenses are taxed as income and when they are not in regards to CRA mileage rules and rates.

Is my mileage reimbursement taxed?

This depends on how your employer reimburses you, and what for. 

1. If your employer provides a reasonable allowance per kilometre driven for business, this would not be taxed.
2. If your employer reimburses you at a per kilometre rate that is either too high or too low compared to the automobile allowance for that year, this will be taxed - and will also require CPP contributions and EI premiums. (see more here)
3. If your employer reimburses your specific car expenses and these are not taxed, you cannot claim these as a deduction as you have not paid any tax on those expenses.

Mileage reimbursement is (almost always) not taxed

If your employer reimburses you only for the work-related expenses that you incurred (for example, fuel, parking, and road tolls), or if they used the automobile allowance rate based on your actual business kilometres driven, this reimbursement is almost always tax-free. 

How do I know if my mileage reimbursement was taxed?

If your payment summary from your employer shows that tax was withheld, then your reimbursement was taxed. If the payment summary doesn’t withhold any tax, then your mileage reimbursement was tax-free. 

Can I still claim my reimbursed car expenses at tax time?

One thing to keep in mind is that if you are paid for your expenses but no tax is deducted, you cannot claim them as a tax deduction. On the other hand, if your reimbursement had tax withheld, you can then claim those specific expenses as a deduction at tax time. 

That's it for our guide on if mileage reimbursements are taxable income in Canada. We hope we've been of assistance and made your mileage tracking a bit easier. 

Happy tracking! 

 

Related articles

• The current CRA mileage rate for business
• How to calculate mileage reimbursement
• Do I need to reimburse employees? Rules for employers

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This material has been prepared for general informational purposes only, and should not be taken as professional advice from Driversnote. You should consider seeking independent legal, taxation, or financial advice from a professional to check how this information relates to your own circumstances. Relevant laws also change from time to time.