April 19, 2021

Mileage reimbursement for employees

PUBLISHED APR 19, 2021 • 10 MIN READ

As an employee in Canada, you might be reimbursed by your employer for work-related car expenses. If your employer does not offer reimbursement, you may also be eligible to deduct your car expenses from your tax return each year. 

This guide is for those who want to know about mileage reimbursement for employees. We've written separate guides for business owners and the self-employed. We aim to provide an overview of:

  • What car expenses can I be reimbursed for?
  • What are the rules for being reimbursed as an employee?
  • What can I expect from my employer?
  • How do I track and log mileage? and
  • How do I report my mileage?

Are there mileage reimbursement rules for employees?

While each employer has their own rules and restrictions around what exactly can be reimbursed or covered by a car allowance, the below is handy to keep in mind:

If you use your own car (including a leased car), you can claim all work-related travel expenses from your employer or in your tax return.

If your travel was partly private, you can claim only the work-related portion.

In Canada, the CRA has its own definitions for different types of car - being motor vehicles, passenger vehicles, zero-emission passenger vehicles, and zero-emission vehicles. Learn more about these here.

When can I claim reimbursement for business driving?

You can generally claim reimbursement for your car expenses if you use your own car for your work. Some examples of business-related travel include:

  • Attending meetings or conferences away from your usual workplace
  • Collecting supplies or delivering items
  • Travelling from your usual workplace or home to an alternative workplace (for example, a client’s office or worksite)

Generally, travel from home to work is not claimable. 

So, I am eligible for mileage reimbursement. Now what?

This will depend on if the vehicle belongs to you or someone else.

I own or lease the vehicle

If you own or lease the vehicle you drive for business, the most common option for employers is to use a mileage rate (for example, the CRA’s automobile allowance rate) for business travel instead of having you record all your expenses.

This way, the only extra expenses you might need to record are things like parking costs and road tolls, rather than every cost associated with owning a car.

Your employer should tell you which records they need you to keep. If they use a cents per km mileage rate, they should let you know what the specific rate is. Please note, if they reimburse you at a different rate than the CRA automobile allowance rate, they may need to withhold tax on the reimbursements.

For instance, the 2021 automobile allowance rate is $0.59 per km for the first 5,000km. If your employer reimburses you $1.00 per km, the total reimbursement needs to be declared as income.

Finally, unless your employer doesn't allow it, there's nothing to say you can't use multiple vehicles. Simply record your mileage separately for each vehicle.

The vehicle is provided by my employer

If you drive a vehicle owned by your employer, you may still be able to get reimbursed for the expenses of driving and operating the car — for instance, expenses for gas, parking, and road tolls. 

You generally won’t be able to use a cents per km rate, as these account for the cost of owning a vehicle. Make sure you keep a record of all of your work-related expenses, as almost all employers will require receipts or invoices 

I’m also self-employed

If you are both self-employed and also an employee, you need to keep separate records for each. We’ve got you covered with our guide for self-employed that we linked to above, and you should also read the rest of this overview for employees.  Keep in mind that as a self-employed individual, you can claim deductions for any car expenses accrued while doing business. If you have a vehicle that you only use for your business, not only can you deduct your mileage, but all operating expenses for the car. 

Work-related expenses - what records do I need to keep?

f you are claiming mileage reimbursement from your employer, they will advise you of their requirements - but in general, the things you’d want to keep a record of are your mileage, parking costs, tolls, and other expenses you incur during your work-related travel.

Although you don’t need to provide written evidence, you do need to show that you drove the kilometres being claimed. Common ways of showing this are through an automatic logbook application, or by providing diary records of work-related driving.

For any trip logged as business-related, you’ll most likely need to note the following:

  • Date
  • Destination
  • Purpose; and
  • Number of kilometres driven

If you use the car for both private and business purposes, you’ll need to keep a record of the mileage that you drive for each, because you will only be able to claim the expenses incurred for work-related driving. 

Remember, the CRA requires you to keep receipts and anything else used to calculate a tax deduction for 6 years. While an employer may not require the same level of record-keeping, we do recommend following the CRA’s guidance, particularly if you think you will be claiming any car expenses as a deduction at tax time.

Is my mileage reimbursement taxed?

This depends on how your employer processes your claim. 

  1. If your employer provides reimbursement at the standard rate for the relevant year, this would not be taxed.
  2. If your employer provides reimbursement at an alternative rate to the CRA’s per-kilometre rate, this may be taxed.
  3. If your employer reimburses your specific car expenses, these may be taxed (however you may be able to claim these as a deduction in your tax return).
  4. 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.

How can I easily track my mileage for reimbursement?

There are no exact requirements for how you keep track of mileage. Your employer might require you to use a certain method or provide certain records, and they need to inform you of it. A lot of people have to choose for themselves.

Most people use an app to both track their trips and generate mileage reports for them. Depending on the app, it can even take away the pain of forgetting to record a trip. Driversnote is one such mileage logbook app, but there are several similar products in Canada, and we recommend you look for one that suits your purpose.

Other alternatives are spreadsheets, like Excel or Google Sheets, that you can share with your manager and/or accountants, but then you might need to take down odometer readings every trip to figure out your mileage accurately.

That's it for our guide on the basics of mileage reimbursement for employees in Canada. We hope we've been of assistance :)

Happy tracking! 

 

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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.