April 19, 2021

Mileage reimbursement for employees

UPDATED SEP 23, 2021 • 10 MIN READ

If you are 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. The goal of this article is to help you understand the following: 

  • 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? 
  • 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 commute was partially private, you can claim only the job-related part of your automobile costs. 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?

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

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

Generally, travel from home to work is not eligible for mileage reimbursement.

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

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

If you 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 additional costs you'll have to track are parking fees and tolls, rather than every cost related with owning a car.

Your employer should tell you which records they need you to keep.They should tell you what the particular pricing is if they employ a cents per km mileage rate. 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 company forbids it, there's no reason you can't drive multiple cars. Simply record your mileage separately for each vehicle.

Mileage tracking made simple

Try our easy-to-use app for free.

If the vehicle is provided by your employer

If you drive a car owned by your employer, you might be eligible for reimbursement for the costs of driving and maintaining the vehicle, such as gas, parking, fees and 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. You can use a logbook or a mileage log app to make sure your reports are as accurate as possible. 

What kind of deductions can I claim as self-employed?

Remember that as a self-employed person, you can deduct any car expenditures incurred while conducting 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 as well.

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

If you are claiming mileage reimbursement from your employer, they will inform  you of their requirements and rules - but in short, the things you’d want to keep a record of are your mileage, parking costs, tolls, and other expenses you arise during your work-related journeys.

Although you don’t need to provide written evidence, you do need to show that you drove the kilometres/miles being claimed. Some common ways of showing this are through an automatic logbook application, another type of mileage tracker or by providing diary records of work-related trips.

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

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

Do I need to keep a mileage log for private purposes too? 

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 company reimburses you for certain car expenditures that aren't taxed, you can't deduct them because you haven't paid any taxes on them.

Mileage tracking made simple

Try our easy-to-use app for free.

How can I keep track of my miles in order to receive reimbursement? 

There are no specific guidelines for keeping track of miles. Your employer may ask you to utilize a specific method or produce specific records, and they must notify you of this requirement.

The majority of users utilize an app to log their trips as well as generate mileage statistics. It may even relieve the sting of neglecting to record a journey, depending on the app. Driversnote is one such mileage logbook app, but there are several more available in Canada, and we recommend that you find one that best meets your needs.

Alternatives to using a mileage tracker app 

Other options include spreadsheets, such as Excel or Google Sheets, that you may share with your boss and/or accountants, but you'll need to record odometer readings for each trip to precisely calculate your mileage. An iBeacon can be used in conjunction with a mileage logbook app to track your trips automatically and precisely.

That concludes our overview of the fundamentals of employee mileage reimbursement in Canada. We sincerely hope that we have 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.