Motor vehicle expenses
You can deduct expenses you paid to run a motor vehicle you use to earn employment income. Your motor vehicle expenses include any GST and provincial sales tax (PST), or HST, you paid on these expenses.
You may be able to get a rebate of the GST/HST you paid. For more information, see Employee GST/HST rebate.
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What expenses can you deduct
If you are an employee earning commission income, you can deduct expenses for your vehicle as long as you meet the conditions outlined for commission employees.
If you are an employee earning a salary, you can deduct expenses for your vehicle as long as you meet the conditions outlined for salaried employees.
Deductible expenses
The types of expenses you can deduct include:
- fuel (such as gasoline, propane and oil) and electricity
- maintenance and repairs
- insurance
- licence and registration fees
- capital cost allowance
- eligible interest you paid on a loan used to buy the motor vehicle
- eligible leasing costs
Enter these amounts in the “Calculation of Allowable Motor Vehicle Expenses” area of Form T777, Statement of Employment Expenses.
What kind of vehicle do you own
For tax purposes, there are two types of vehicles you should know about. They are motor vehicles and passenger vehicles (or zero-emission passenger vehicles).
The kind of vehicle you use may affect the expenses you can deduct. If you own or lease a passenger vehicle or a zero-emission passenger vehicle, there may be a limit on the amounts you can deduct for capital cost allowance (CCA), interest, and leasing costs.
What is a motor vehicle
A motor vehicle is an automotive vehicle designed or adapted for use on highways and streets. It is not a trolley bus, or a vehicle designed or adapted to be operated exclusively on rails.
What is a passenger vehicle
A passenger vehicle is a motor vehicle (other than a zero-emission vehicle) designed or adapted primarily to carry people on highways and streets. It seats a driver and no more than eight passengers. Most cars, station wagons, vans, and some pick-up trucks are passenger vehicles. They are subject to the limits for CCA, interest, and leasing costs.
A passenger vehicle does not include:
- an ambulance
- clearly marked police and fire emergency-response vehicles
- clearly marked emergency medical services vehicles used to carry paramedics and their emergency medical equipment
- a motor vehicle you bought to use mainly (more than 50%) as a taxi, a bus to transport passengers, or a hearse in a funeral business
- a motor vehicle you bought to sell, rent, or lease in a motor vehicle sales, rental, or leasing business
- a motor vehicle (except a hearse) you bought to use in a funeral business to transport passengers
- certain vans, pick-up trucks, or similar vehicles (see the Vehicle definitions chart below for details)
What is a zero-emission passenger vehicle (ZEPV)
A ZEPV means an automobile of a taxpayer that is included in Class 54. The following are special rules applicable to a ZEPV:
- The capital cost of the ZEPV will be restricted to a prescribed amount for the purpose of calculating the CCA. For 2024, the prescribed amount will be $61,000, plus the federal and provincial sales taxes that would have been paid if the ZEPV was purchased for $61,000 (before the application of federal and provincial sales tax)
- When a ZEPV whose capital cost is subject to the above restriction, is disposed of, its proceeds of disposition will be adjusted. Specifically, the proceeds of disposition will be multiplied by a fraction equal to the ratio of the capital cost (that is, the prescribed amount) of the vehicle divided by the actual costFootnote 1 of the vehicle
The vehicle definitions chart below should help you determine what type of vehicle you have. It does not cover every situation, but it should give you a better idea of how the Canada Revenue Agency (CRA) defines vehicles you bought or leased.
Vehicle definitions chart
| Type of vehicle | Seating (includes driver) | Business use in year bought or leased | Vehicle definition |
|---|---|---|---|
| Coupe, sedan, station wagon, sports car, or luxury car | 1 to 9 | 1% to 100% | passenger |
| Pick-up truck used to transport goods or equipment | 1 to 3 | more than 50% | motor |
| Pick-up truck (other than above)Footnote 2 | 1 to 3 | 1% to 100% | passenger |
| Pick-up truck with extended cab used to transport goods, equipment, or passengers | 4 to 9 | 90% or more | motor |
| Pick-up truck with extended cab (other than above)Footnote 2 | 4 to 9 | 1% to 100% | passenger |
| Sport-utility used to transport goods, equipment, or passengers | 4 to 9 | 90% or more | motor |
| Sport-utility (other than above) | 4 to 9 | 1% to 100% | passenger |
| Van or minivan used to transport goods or equipment | 1 to 3 | more than 50% | motor |
| Van or minivan (other than above) | 1 to 3 | 1% to 100% | passenger |
| Van or minivan used to transport goods, equipment, or passengers | 4 to 9 | 90% or more | motor |
| Van or minivan (other than above) | 4 to 9 | 1% to 100% | passenger |
Note: A passenger vehicle or a motor vehicle may also qualify as a zero-emission vehicle or a zero-emission passenger vehicle.
Joint ownership
If you and somebody else own or lease the same passenger vehicle, the limits on CCA, interest, and leasing costs still apply, and in case of zero-emission passenger vehicles, the limits on CCA and interest will apply. The total amount the joint owners can claim cannot be more than the amount that would be allowed if only one person had owned or leased the vehicle.
Employment use of a motor vehicle
If you use a motor vehicle for both employment and personal use, you can deduct only the percentage of expenses related to earning income. To support the amount you can deduct, keep a record of both the total kilometres you drove and the kilometres you drove to earn employment income. The CRA considers driving back and forth between home and work as personal use.
If you use more than one motor vehicle to earn employment income, calculate the expenses for each vehicle separately.
Interest expense
You can deduct interest you paid on money you borrowed to buy a motor vehicle, passenger vehicle, or zero-emission passenger vehicle that you use to earn employment income. Include the interest you paid when you calculate your allowable motor vehicle expenses.
If you use a passenger vehicle or a zero-emission passenger vehicle to earn employment income, there is a limit on the amount of interest you can deduct when buying it. Use the "Available interest expense for passenger vehicles or zero-emission passenger vehicles chart" to calculate the amount you can deduct.
Enter your available interest expense amount on line 26 of Form T777.
Available interest expense for passenger vehicles or zero-emission passenger vehicles chart
Total interest paid in the year $ ________ A
$10 x the number of days for which interest was paid $ ________ B
The available interest expense is the lower of Amount A and amount B.
Leasing costs
You can deduct amounts you paid to lease a motor vehicle you used to earn employment income. Include the leasing costs you paid when you calculate your allowable motor vehicle expenses.
If you use a passenger vehicle to earn employment income, there is a limit on the amount of leasing costs you can deduct.
Use the "Eligible leasing costs for passenger vehicles leased after December 31, 2000 chart" below to calculate your eligible leasing costs for a passenger vehicle leased after December 31, 2000. Enter your eligible leasing costs on line 27 of Form T777.
Eligible leasing costs for passenger vehicles leased after December 31, 2000 chart
$ Blank space for dollar value
Line 1
2. Enter the total lease payments deducted for the vehicle before 2024.
$ Blank space for dollar value
Line 2
3. Enter the total number of days the vehicle was leased in 2024 and previous years.
Blank space for number of days vehicle leased in 2012 an previous year
Line 3
4. Enter the manufacturer’s list price.
$ Blank space for dollar value
Line 4
5. $43,529Footnote 3 + GSTFootnote 4 and PSTFootnote 4 , or HSTFootnote 4 Footnote
$ Blank space for dollar value
Line 5
6. Enter the amount from line 4 or line 5, whichever is more.
$ Blank space for dollar value
x 85%
$ Blank space for dollar value
Line 6
7. ($1,050Footnote 5 + GSTFootnote 4 and PSTFootnote 4 , or HSTFootnote 4 ) x line 3 =
$ Blank space for dollar value
÷ 30 =
$ Blank space for dollar value
− Line 2
$ Blank space for dollar value
Line 7
8. ($37,000Footnote 6 + GSTFootnote 4 and PSTFootnote 4 , or HSTFootnote 4 ) x line 1 =
$ Blank space for dollar value
÷ Line 6
$ Blank space for dollar value
Line 8
Your eligible leasing cost is the lower of the amounts on line 7 and line 8.
Example
On February 1, 2024, Tom, a resident of Nova Scotia, began leasing a car that meets the definition of a passenger vehicle. He used the car to earn employment income. Tom will complete the Chart using the following information for 2024:
- Monthly lease payment: $500
- Lease payments made for 2024: $5,500
- Number of days the car was leased in 2024: 335
- Manufacturer’s suggested list price: $28,000
- HST ($43,529 × 15% = $6,529) = $6,529
- HST ($1,050 × 15% = $158)= $158
- HST ($37,000 × 15% = $5,550) = $5,550
| Line | Leasing agreement information and calculations | Amount |
|---|---|---|
| 1. | Total lease charges paid for the vehicle in 2024 | $ 5,500 |
| 2. | Total lease payments deducted for the vehicle before 2024 | $ 0 |
| 3. | Total number of days the vehicle was leased in 2024 and previous years | 335 |
| 4. | The manufacturer's list price | $28,000 |
| 5. | $43,529 + $6,529 | $50,058 |
| 6. | Enter the amount from line 4 or line 5, whichever is more: $50,058 x 85% |
$42,549 |
| 7. | ($1,050 + $158 = $1,208) x 335 = $404,680 ÷ 30 = $13,489 − line 2 | $13,489 |
| 8. | ($37,000 + $5,550 = $42,550) x $5,500 = $234,025,000 ÷ $42,549 | $ 5,500 |
Tom would enter $5,500 (the lower of the amounts on line 7 and line 8) on line 27 of Form T777.
Note: Most leases do not include items such as insurance, maintenance, and taxes. You have to pay these amounts separately. Therefore, list these expenses separately on Form T777. Do not include them in your calculation of eligible leasing costs.
If the lease agreement for your passenger vehicle does include items such as insurance, maintenance, and taxes, include them as part of the lease charges in your calculation.
Repayments and imputed interest
When you lease a passenger vehicle, you may have either a repayment owing to you, or you may have imputed interest. If this is your situation, you cannot use the Chart, Eligible leasing costs for passenger vehicles leased after December 31, 2000. Instead, contact the CRA.
Imputed interest is interest that would be owing to you if you were paid interest on money you deposited to lease a passenger vehicle. You can only consider imputed interest as leasing costs on a passenger vehicle if all the following apply:
- You made one or more deposits for the leased passenger vehicle
- All deposits are refundable
- The deposits total more than $1,000
Keeping records
Since you can deduct motor vehicle expenses only when they are reasonable and you have receipts to support them, keep a record for each vehicle you used. The record should include the total kilometres you drove as well as the kilometres you drove to earn employment income. The record for each trip you took to earn employment income should list the date, destination, purpose, and number of kilometres. Record the odometer reading of each vehicle at the beginning and again at the end of the year.
If you change motor vehicles during the year, record the odometer reading of each vehicle when you buy, sell, or trade it. Write down the dates as well.
Completing your tax return
Enter on line 22900, the allowable amount of your employment expenses from the total expenses line of Form T777, Statement of Employment Expenses.