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May 10, 2022 - 5 min read

Mileage reimbursement for employees

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 in Canada for employees. We've written separate guides for business owners and the self-employed.

Mileage reimbursement rules for employees

While the CRA establishes some base rules for mileage reimbursement through an automobile allowance for employees, employers can set their own rules and restrictions around what exactly they reimburse or cover by the automobile 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 on your tax return.

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

What you can receive a mileage reimbursement in Canada for

You can claim an allowance 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 in Canada.

CRA automobile allowance rates

The current CRA automobile allowance rates for 2022 are:

  • 61 cents per kilometre for the first 5,000km driven
  • 55 cents per kilometre after that

The Northwest Territories, Yukon, and Nunavut get an additional 4 cents per kilometre.

Your employer should inform you if they are using the official CRA rates or different automobile allowance rates for your mileage reimbursement.

Note that if you’re reimbursed at a different rate than the CRA automobile allowance rate, you may pay income, pension and insurance contributions on your automobile allowance.

How to receive mileage reimbursement in Canada from your employer

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

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 the CRA 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 to owning your vehicle.

Finally, unless your company forbids it, there's no reason you can't drive multiple cars. Simply record your mileage separately for each vehicle.

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 for business-related kilometres, such as gas, parking, fees and tolls. 

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

Records you need to keep for your automobile allowance

If you are claiming an automobile allowance from your employer, they will inform you of their requirements and rules - but in short, you will need to show your employer that you drove the kilometres you’re claiming reimbursement for. Common ways of keeping records of your business driving are through an automatic logbook mobile application, physical records or spreadsheets of work-related trips.

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

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

Keeping records of your personal driving

Your employer will let you know if you should keep records of both business and personal driving.

In case your employer doesn’t provide a tax-free mileage reimbursement, you will be able to claim a CRA automobile allowance at tax time. In this case, the CRA requires you to keep receipts and anything else used to calculate your claim 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 will be claiming any CRA automobile allowance.

Easiest ways to keep a record of your trips

A majority of Canadian firms rely on the pen and paper method - manually recording each trip detail. However, if you’d like to save some time and make sure you don’t forget to write down any trips you should be reimbursed for, we recommend finding a mileage tracking app.

Apps can track your mileage automatically, logging all the needed details for you. You’ll be able to provide your employer with consistent and correct records of your driving.

Will your automobile allowance be taxed?

This depends on how your employer processes your claim. 

  1. If your employer provides an automobile allowance at the standard rate for the relevant year, it would not be taxed.
  2. If your employer provides reimbursement at a different (too high or too low) rate to the CRA’s per-kilometre rate, it may be taxed.
  3. If your employer reimburses your specific car expenses, these will 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.

FAQ

What qualifies for mileage reimbursement in Canada when you are an employee driving your own car is every trip that you take for business purposes. Trips such as going to a conference, visiting a client's office, meeting a client, and attending a work-related meeting to a location that is far enough to have to drive to it.
It is not mandatory by law for your employer to reimburse you but it is standard practice nowadays and most businesses do that. If you think you should be reimbursed for some business-related driving with your own personal car, we encourage you to talk to your employer and find an agreement.

How to automate your mileage logbook

Manually filling out your logbook can get tedious - see how to automatically track trips for your mileage reimbursement or deductions.

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.