If you are an employee who drives your own car for client visits, job sites or deliveries, you may be able to deduct the employment-use share of what the car costs you. The rules are clear but strict: you need a signed T2200 from your employer, commuting never counts, and motor vehicle expenses are among the most audited deductions in Canada. This page covers the employee claim; it is one of the employment deductions in our overview of Canadian tax deductions and credits.
If you are self-employed and use your car in your business, the claim works differently (no T2200, and it goes on your business statement). The self-employed vehicle expenses guide covers that case, including the logbook, CCA classes and limits.
The employee rules at a glance
| Question | Employees |
|---|---|
| Requires T2200? | Yes |
| Can deduct CCA? | Yes |
| Can deduct parking at home? | No |
| Can deduct commuting to work? | No |
| Claimed on | T777 → Line 22900 |
Step 1: Track your kilometres
A record of your driving is mandatory. CRA can deny your entire vehicle claim without one.
Each entry must include:
- Date of the trip
- Destination
- Purpose of the trip
- Kilometres driven
At year-end, record:
- Total kilometres driven for work
- Total kilometres driven for all purposes
Employment-use percentage = Work km ÷ Total km × 100
Example: 12,000 work km ÷ 20,000 total km = 60% employment use
CRA also allows a simplified approach after you have kept a full record for one base year: in later years you can keep a sample record for part of the year, but only if your driving patterns have not changed significantly. The self-employed vehicle guide sets out how that sample-year method works.
What does NOT count as work kilometres?
- Driving from home to your regular place of work (commuting), which is never deductible for employees
- Personal errands
Step 2: Calculate eligible vehicle expenses
Operating expenses you can deduct (proportionally):
- Fuel / gas
- Oil changes, maintenance, and repairs
- Insurance
- Licensing and registration fees
- Lease payments (subject to a monthly cap)
- Interest on a vehicle loan (subject to a monthly cap)
- Car washes (if your work requires a clean vehicle)
- Parking at client locations or temporary work sites (not at your employer’s office)
Operating expenses you cannot deduct:
- Capital cost of the vehicle (that is handled through CCA separately)
- Traffic fines
- Parking at your own workplace
Calculation example:
| Expense | Annual Amount | Employment Use (60%) | Deductible |
|---|---|---|---|
| Fuel | $4,200 | 60% | $2,520 |
| Insurance | $2,400 | 60% | $1,440 |
| Maintenance | $800 | 60% | $480 |
| Registration | $150 | 60% | $90 |
| Lease ($900/mo × 12) | $10,800 | 60% | $6,480 |
| Total | $18,350 | $11,010 |
Step 3: Capital cost allowance if you own the car
If you own the vehicle rather than lease it, you can also claim capital cost allowance (CCA), the annual depreciation deduction, on the employment-use share; in the year you acquire the vehicle you can only claim 50% of the full annual CCA. The CCA classes, the capital cost limit for expensive vehicles, the lease and loan-interest caps, and recapture or terminal loss when you sell are explained in the self-employed vehicle expenses guide.
Car allowances and company cars
If your employer pays you an allowance for driving, a per-kilometre allowance at a reasonable CRA rate is not taxable, while a flat monthly car allowance is fully taxable. Allowances and employer-provided cars are covered in whether a company car is a taxable benefit.
How to claim on your tax return
Complete Form T777 (Statement of Employment Expenses), keep your employer’s signed T2200, and claim the total on Line 22900 of your T1.
Other employment expenses go through the same T777: a phone you must use for work under the rules for deducting a cell phone, meals when your job keeps you away from your employer’s establishment for at least 12 hours under the meals and entertainment rules, and tools if you are a tradesperson under the tradesperson’s tools deduction. If you also work from home, the home office deduction for employees explains that claim.
CRA audit red flags for vehicle claims
- A very high employment-use percentage, in the 80–90% range and up (CRA finds this implausible for most taxpayers)
- No trip log, or an obviously fabricated one
- Claiming a vehicle that is also used by a teenager or non-working family member
- Inconsistent mileage across years with no explanation
- Commuting distances included in work km
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