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The Tax Thread
- Thread starter Evoex
- Start date
For various reasons, I just pay mileage at CRA max rate. Simplifies documentation. I do it clean but there are ways to juice the program to increase money transferred to you tax-free from a business. For instance with a multi-vehicle household, one of the vehicles may be used only for work purposes and therefore all mileage would be reimbursed.
If you are a contractor or don't have control of the business reimbursing, that strategy may not work for you. At a past employer, my wife was required to use her vehicle to go to different client sites daily. Work reimbursed mileage (crap rate) and most of her co-workers also wrote off fuel/maintenance/insurance/etc. Yikes. If CRA caught onto one employee, they would burn them all down and it wouldn't be pretty. I kept my wifes filings clean as I don't want to fight CRA.
A former employer chose to provide themselves a monthly car allowance as opposed to paying out specific expenses. That was on the advice of their accountant.
If you are claiming the expenses on your personal income tax, the employer should give you a completed T2200 to legitimize the deduction. T777 is the form you fill out to calculate the deduction.
Employment Expenses 2023 - Canada.ca
Use this guide if you are an employee and your employer requires you to pay expenses to earn your employment income.
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@Evoex whenever we had an investment property I’d give the number of kms at the start of the year, end of the year, and made less than 50% for work so it doesn’t raise eyebrows. Accountant said up to 55% use for work doesn’t do anything to perk up CRA. We haven’t had a problem in 15+ years but they’re legit claims.
Wife same thing.
Currently deciding if (big if) I buy a newer car / Maverick whether to claim somehow against the small business I restarted.
Need to sit down with accountant.
As per car, same goes for a % of your home used for the business. For me it’s a small basement room that takes 5-10% of mortgage interest, utilities, bills, etc that gets written off.
Wife same thing.
Currently deciding if (big if) I buy a newer car / Maverick whether to claim somehow against the small business I restarted.
Need to sit down with accountant.
As per car, same goes for a % of your home used for the business. For me it’s a small basement room that takes 5-10% of mortgage interest, utilities, bills, etc that gets written off.
Be very careful with mortgage interest. Explicitly not allowed as part of the office expense claim. Which is a shame as it would dominate the numbers.
Expenses you can claim – Home office expenses for employees - Canada.ca
What can and can't be claimed as home office expenses.
Big change for this year is the work from home T2200 form. Last few years it’s been a simplified process. Now it’s a bit more involved but worth it if you work from home for a period of time throughout the year. Claiming for a proportion of utilities and maintenance for your work from home space.
Relax
Well-known member
So to be eligible for 2023:
"Your employer required you to work from home
This requirement does not have to be part of your employment contract, however, it should be a written or verbal agreement.
For 2023, if an employee has voluntarily entered into a formal telework arrangement with their employer, the employee is considered to have been required to work from home."
I worked from home 100% during the pandemic. For 2023 they no longer REQUIRED me to work from home, but allowed me to continue working from home full time. Does this constitute a formal telework arrangement?
"Your employer required you to work from home
This requirement does not have to be part of your employment contract, however, it should be a written or verbal agreement.
For 2023, if an employee has voluntarily entered into a formal telework arrangement with their employer, the employee is considered to have been required to work from home."
I worked from home 100% during the pandemic. For 2023 they no longer REQUIRED me to work from home, but allowed me to continue working from home full time. Does this constitute a formal telework arrangement?
Yes. Verbal is fine! The form T2200 only gets sent in if you get audited. Otherwise it’s just your employer signing off on the verbal/contractual agreement and it stays in your personal file or a copy stays with you. Unfortunately the form is a bit more involved than in the pandemic days but not by much.
Edit: make sure you do it, the tax benefits are pretty good.
I think the last few years it’s been a simple C days in office versus Y days at home…
This new requirement may be better for those that continue to WFH.
The last few years it was even simpler than that I think. Basically HR just signed a form stating “yep, this guy worked from home” then you claimed whatever. The new one has wording which gives leeway like “about what %age of time is spent working from home” along with more detailed stuff like any expenses that you’re reimbursed for by work etc.
AllistonGT
Well-known member
Great idea for a topic!
I guess I should weigh in as your friendly neighbourhood taxman...
Are you an employee (receives a T4 and taxed deducted at source by the employer) or are you self-employed? I thought posties are employees of CP. Employee and self-employed individuals are two very different cans of worms vis-a-vis expenses.
More details are needed if you want a more nuanced answer (and no I'm not here to entrap anyone). Feel free to DM me also.
Logbooks are still required (except for flat-rate allowances).
The main difference between per-km rate (btw the rate is set by the Treasury Board, the Agency is just applying/enforcing it) and a flat-rate allowance is that the per-km rate is NOT TAXABLE to the employee, and a flat-rate is TAXABLE. That is because there's no requirement for record keeping for a flat-rate, and the % of use for business therefore doesn't matter.
Not exactly true, you're fortunate you've flown under the radar so far, but as usual YMMV when you try to see how far to bend the rules.
Having an investment property is also not necessarily the same as having a "real" business under the Income Tax Act. There are a slew of expenses that are not allowed if you only have an investment property (passive vs active income question).
Assuming you have an active business, and you want to claim expenses related to your vehicle, you must to maintain a logbook to demonstrate the business vs personal split of the use of your vehicle. If you can't produce proof of the claimed usage %, the Agency can (and do) deny your claimed amount in full for up to 6 years back at any given year, you'll owe penalty and interest on top (which will normally be in excess of the principal amount re-assessed).
There are also variables when it come to business-use-of-home expenses, like whether you have a dedicated home office or not.
Are you an employee (receives a T4 and taxed deducted at source by the employer) or are you self-employed? I thought posties are employees of CP. Employee and self-employed individuals are two very different cans of worms vis-a-vis expenses.
More details are needed if you want a more nuanced answer (and no I'm not here to entrap anyone). Feel free to DM me also.
For various reasons, I just pay mileage at CRA max rate. Simplifies documentation. I do it clean but there are ways to juice the program to increase money transferred to you tax-free from a business. For instance with a multi-vehicle household, one of the vehicles may be used only for work purposes and therefore all mileage would be reimbursed.
If you are a contractor or don't have control of the business reimbursing, that strategy may not work for you. At a past employer, my wife was required to use her vehicle to go to different client sites daily. Work reimbursed mileage (crap rate) and most of her co-workers also wrote off fuel/maintenance/insurance/etc. Yikes. If CRA caught onto one employee, they would burn them all down and it wouldn't be pretty. I kept my wifes filings clean as I don't want to fight CRA.
A former employer chose to provide themselves a monthly car allowance as opposed to paying out specific expenses. That was on the advice of their accountant.
If you are claiming the expenses on your personal income tax, the employer should give you a completed T2200 to legitimize the deduction. T777 is the form you fill out to calculate the deduction.
Employment Expenses 2023 - Canada.ca
Use this guide if you are an employee and your employer requires you to pay expenses to earn your employment income.www.canada.ca
Logbooks are still required (except for flat-rate allowances).
The main difference between per-km rate (btw the rate is set by the Treasury Board, the Agency is just applying/enforcing it) and a flat-rate allowance is that the per-km rate is NOT TAXABLE to the employee, and a flat-rate is TAXABLE. That is because there's no requirement for record keeping for a flat-rate, and the % of use for business therefore doesn't matter.
Not exactly true, you're fortunate you've flown under the radar so far, but as usual YMMV when you try to see how far to bend the rules.
Having an investment property is also not necessarily the same as having a "real" business under the Income Tax Act. There are a slew of expenses that are not allowed if you only have an investment property (passive vs active income question).
Assuming you have an active business, and you want to claim expenses related to your vehicle, you must to maintain a logbook to demonstrate the business vs personal split of the use of your vehicle. If you can't produce proof of the claimed usage %, the Agency can (and do) deny your claimed amount in full for up to 6 years back at any given year, you'll owe penalty and interest on top (which will normally be in excess of the principal amount re-assessed).
There are also variables when it come to business-use-of-home expenses, like whether you have a dedicated home office or not.
This has a good section on business use of home expenses:
www.canada.ca
This guide (geared towards employers) discuss most applicable taxable/non-taxable benefits:
www.canada.ca
Self-employed Business, Professional, Commission, Farming, and Fishing Income: Table of Contents - Canada.ca
Information for self-employed individuals and partners in partnerships, including farmers and fishers, on how determine if they have business income and how to fill in their Form T2121, T2125, or T2042.
This guide (geared towards employers) discuss most applicable taxable/non-taxable benefits:
Employers' Guide – Taxable Benefits and Allowances - Canada.ca
This guide is for employers who provide their employees with benefits and allowances. See the guide to determine if the benefit or allowance is taxable and the necessary reporting requirements.
Correct. I was referring to my instructing job where I'm hired as an outside contractor.
Start a logbook, or you can re-create one using your previous year's instructing schedule. You'll need to track date, start location, end location, and mileage for each business trip. You'll also need the total mileage driven each calendar year for whichever vehicle you wish to claim. Once you have that, then you can work out the % of business use for your vehicle, and you may apply that % across all of the current expenses (fuel, insurance, licensing, routine maintenance, interest cost, leasing cost) incurred by that vehicle.
If you own the vehicle, you may also claim the CCA (Capital Cost Allowance) aka depreciation for the vehicle, which is a somewhat different ball of wax versus the current expenses. Beware claiming CCA as there can be re-capture issues (basically having to pay back some of the CCA) when you sell the vehicle.
Once you have maintained a logbook for a full year, that is considered as your base year and you may maintain a sample logbook for 3 month in subsequent years. So long as the % from the sample year is +/- 10%, you may keep claiming the % from the base year.
P.S. - if your business use is < 10%, you're not eligible to claim anything. Conversely, if business use is 90%+, you can claim the vehicle in full.
PacoT
Well-known member
Thanks for your contributions @High Flya .
As a CPA in the making (non focused on tax) it is interesting the perspective from someone in your position.
As a CPA in the making (non focused on tax) it is interesting the perspective from someone in your position.
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Mad Mike
Well-known member
I don’t mind sharing what I do, but I always advise people who believe they have unused deductions to see an accountant or tax specialist.
If you use you vehicle for work, you may be able to write off some of you expenses. There are too many scenarios and conditions to easily explain.
If you ask about a specific situation, I’ll bet you’ll get some useful guidance.
Mikedezo44
Well-known member
I am in similar situation as MP, trying to get home put into my name from parents. No money changing hands. According to my customer yesterday he was extremely confident no taxes need to be paid! woohoo. I questioned it but he is a realtor of 36 years and claimed to be an expert on the subject. Did so with his daughter. Sometimes it's easier just to agree than try and poke holes in their logic. I said we already talked to an accountant who explained the best course of action. He told me if you don't get the answer you want, find another accountant.
Relax
Well-known member
Realtor for 36 years, tax accountant for how many?
If you shop around, you can always find an accountant who will give you the answer you want to hear - just ask my in-laws who are still paying off their Amway taxes, penalties, and interest). When the CRA comes knocking, it doesn't matter who said what, all that matters is their rules. So find a tax accountant (or lawyer) with experience with that specific transaction and knows the rules inside out.
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