Is there tax relief for the high cost of driving?

Employees who have worked from home for more than a year are starting to return to the daily commute. Many are facing sticker shock with gas price increases of up to 75% over April of 2020.

The practical reality is that, even for those who wish to do less driving and reduce their carbon footprint, driving less just isn’t a realistic option. While major urban centres are usually well-served by public transit, it’s a different picture in Saskatchewan where the cost of driving is often an unavoidable, non-discretionary expense.

Unfortunately, for many taxpayers, there’s no relief provided by our tax system to help alleviate the cost of driving to work; it is considered a personal expense. That said, there are some narrow circumstances in which employees can claim a deduction for the cost of using a personal vehicle for work-related travel.

For instance, an employee might be required to go to clients' premises and be expected to use his or her own vehicle to get to such meetings. The employee can deduct actual expenses if the employer is prepared to certify on a Form T2200 that:

1. The employee was expected to use his or her own vehicle;
2. The employee pays their own expenses (not reimbursed), and;
3. The employer did not provide a tax-free allowance to cover such expenses.

Eligible expenses include:

• fuel (gasoline, propane, oil)
• maintenance and repairs
• insurance
• licence and registration fees
• depreciation, in the form of capital cost allowance
• eligible interest paid on a loan to buy the vehicle; and
• eligible leasing costs.

Only the portion of expenses incurred for work-related driving can be deducted. The employee must keep a record of both the total kilometres driven and those driven for work purposes. And, of course, receipts must be kept to document all expenses claimed.

The rules governing employee automobile allowances and deductions are outlined on the Canada Revenue Agency website.

Given current gas prices, no amount of tax relief is going to make driving inexpensive. But, seeking out and claiming every possible deduction and credit available under our tax rules can at least help to minimize the pain.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.