Under Canadian tax law, employees can write off the costs of repairs and maintenance work. Learn more about how this works and how you can save on your taxes.
Can you write off car repairs and maintenance expenses?
Currently, Canada allows you to deduct the following motor vehicle expenses :
- Fuel (gasoline, propane, oil)
- Maintenance and repairs
- Insurance
- Licence and registration fees
- Capital cost allowance
- The eligible interest you paid on a loan used to buy the motor vehicle
- Eligible leasing costs.
The short answer is, "yes, repair and maintenance costs are deductible" but you need to meet several criteria to be eligible for the tax deduction. Furthermore, you also need to keep careful records.
What is the car repair deduction?
Abiding by Canadian tax law, employees and self-employed individuals who use their cars for business purposes can deduct a portion of their vehicle-related expenses - including repairs. Employees can also take advantage of the deduction even if they only use their vehicle for work part of the time. They merely have to work out the percentage is used for work, and they can deduct that percentage of their repair expenses. A repair is any service or maintenance work required to keep the vehicle in good working condition. It does not include enhancements or improvements that are not necessary to keep the car running. For example, new brakes fall under the category of repairs, but adding a new stereo or detailing does not. Making this distinction is essential to qualify for the deduction.
What are the criteria for deducting car repairs?
Deducting the costs for repairs and maintenance sounds good, but who is eligible for this deduction? And how do you know how much you can write off? According to the Canada Revenue Agency (CRA), you can deduct vehicle expenses, including repairs, if you meet ALL of the following requirements:
- Your employer requires you to work in a location other than its regular place of business, or you have to travel to different locations as part of your job. Note that commuting does not count as employment-related driving
- The employment contract requires you to pay for your vehicle expenses. This rule doesn't apply if you receive compensation from your employer for these costs or you refuse reimbursement
- Your employer provides you with a non-taxable subsidy for these costs. An allowance is generally non-taxable if it is based solely on a reasonable rate per kilometre
- You keep a record of Form T2200, Declaration of Conditions of Employment. This form must be completed and signed by your employer.
What repairs are eligible? Is there a cap on expenses?
Here are some examples of the repairs you can deduct from your taxes:
- Brake jobs
- Muffler replacement
- Fixing broken taillights
- Repairs following accidents and fender benders, etc.
You cannot deduct expenses for improvements and modifications that are not essential to maintain the vehicle in good working condition. Additionally, the deduction for the repair has to be taken the year the work is carried out. After that, it's no longer a valid deduction.
Are expensive repairs covered?
Canada's tax rules cover all eligible repair costs. There is no deduction limit on the amount spent on repairs. Furthermore, the allowable deduction is equal to the proportion for which the vehicle is used for business purposes. If 50 percent of the use is for legitimate work purposes, then 50 percent of the repair costs can be deducted. Thus, it is imperative to keep good records if you want to claim deductions successfully, which is what the CRA recommends.
How do I claim the deduction for repair expenses?
Keeping meticulous records of your expenditures throughout the year is critical. The best way to do this is by recording your expenses as they occur rather than waiting until the last minute to avoid forgetting a payment or making a mistake. Having the right tool or smartphone app handy can help you with your record-keeping responsibilities.
