Apps can help track mileage and keep work use separate from personal use.pixdeluxe/iStockPhoto / Getty Images
The deadline for filing taxes in Canada for 2026 is April 30. As the big day approaches, Globe Advisor and Globe Investor have teamed up to offer advice on how to maximize returns, find credits and avoid an audit. The full series can be found here.
Many people want to write off their automobile expenses when filing their annual income taxes. But mistakes are common when claiming this deduction, potentially leading to an audit from the Canada Revenue Agency.
“Although not confirmed by the CRA, it’s probably going to be an audit focus for them this year,” says Stefanie Ricchio, a chartered professional accountant at SRBC Inc. in Toronto.
Ms. Ricchio says two categories of people can claim vehicle expenses: those who are self-employed or run a business, and those who are employees and must drive for business purposes (personal commutes to and from work don’t count).
“For people who drive a fair amount of business kilometres, [the deduction] becomes really helpful to reduce their taxable income,” she says.
However, if employees already receive a non-taxable vehicle allowance from their employer, they can’t claim vehicle expenses on top of that.
Vehicle claims may include fuel (or electricity in the case of electric vehicles), interest on car loans and leases, repairs, maintenance, insurance and capital cost allowance, Ms. Riccchio says.
The qualified employee or business owner can claim expenses based on the portion of kilometres used for business each year.
Making the claim
For a salaried employee, the road to claiming auto expenses starts with receiving a signed Form T2200 from their employer, says Kevin Burkett, CPA at Burkett & Co. Chartered Professional Accountants in Victoria. The completed form is the employer’s declaration that the employee was required to use their vehicle for work.
“Without [the form], typically those deductions can’t be claimed,” Mr. Burkett says.
Ms. Ricchio says while employees claim vehicle expenses on Form T777 as employment expenses, the self employed claim them as business deductions on Form T2125.
But completing forms is not enough. Employees and business owners need to track their mileage in a log book – including the date, the starting and ending points, and the distance, Ms. Ricchio says. She suggests including the purpose of the business meeting and names of clients in attendance.
As a best practice, all scheduled meetings should be up to date in the person’s email calendar as proof that the business associate accepted their invitation, she adds.
Not maintaining a log and additional details is where many people fall short at tax time, says Harry Sale, financial advisor at Raymond James Ltd. in Toronto.
“People think a rough mental tally [of mileage] is fine, but the CRA wants actual records,” he says. “Without them, the deduction doesn’t hold up.”
Mr. Burkett confirms that the CRA’s record-keeping standards are stringent.
“You need to be tracking every kilometre of business use versus personal,” he says.
For that reason, Mr. Burkett often advises that a simpler approach is for employers to reimburse employees using the CRA’s prescribed per-kilometre rates, rather than having employees claim vehicle expenses.
For 2025, the prescribed rate was 72 cents per kilometre for the first 5,000 kilometres driven and 66 cents per kilometre thereafter, with slightly higher rates in the territories.
When the allowance is considered reasonable, it’s not taxable to the employee and eliminates the need to calculate and support detailed expense claims, he adds.
For those counting mileage, apps can help. Herman Chan, president and certified financial planner at Crimson Financial in Toronto, recently started his new advisory business and purchased a vehicle. He’s been using an app to track his business mileage and to differentiate it from personal use.
He turns his app on when he starts driving to record the distance, and he can convert the data into an e-mail or a PDF. The app he uses knows when he does a grocery run, goes to the gym or meets with a client.
“It’s a huge time saver,” he says, as he doesn’t have to record the mileage manually, which is a tedious task.
Ms. Ricchio is also a big proponent of technology.
“It just helps us to store our data in a clean, simpler way,” she says. “It also helps if the CRA is requesting data from prior years.”
Mr. Sale encourages his business-owner clients to do the math to see if writing off vehicle expenses even makes sense.
“If most of your driving is personal, the math can work against you,” he says.
For incorporated business owners, he says, deducting vehicle expenses doesn’t happen in isolation. How they draw income from their corporation – whether it’s salary, dividends or a mix – affects how deductions even come into play.
“My job is to flag it early, so they’re having the right conversation with their accountant before they make the decision, not after,” Mr. Sale says.