Tax Tips: How Are Auto Expenses Claimed?

The rules for claiming automobile expenses are similar for both employed and self-employed people, and they are also among the most frequently audited. Taxpayers will want to keep proper documentation and make the claims correctly.

Automotive expenses can be deducted only if they are not reimbursed by the employer. An employee who receives a reasonable allowance for the use of the vehicle may not claim the related expenses. Otherwise, employees can deduct auto expenses when they pay their own auto expenses and are required to use their vehicle in carrying out their duties of employment.

For those who use their vehicle for both personal and business/employment purposes, it is necessary to keep an auto log that records distance driven for both purposes, for at least one year (the base year). After this you can keep the records for as few as three consecutive months, so long as your driving patterns do not vary on either side by more than 10%. You will be able to claim the total expenses for the year, times the ratio that’s determined by the number of kilometres you drove for employment or business purposes, divided by the total driven for the logged period. If math is not your thing, have a tax specialist help you with this.

©2016 Knowledge Bureau Inc. All Rights Reserved. Used with Permission.

Refer a Friend	Research	Calculators	Course Trials