The Canada Revenue Agency, also referred to as CRA and the Canadian equivalent to the IRS, allows residents to deduct business mileage on a cost per kilometre basis. This is known as the CRA Mileage Rate or the Automobile Allowance Rate, and just as the U.S. Standard Mileage Rate, it is not a fixed value and can vary year to year.
What is the 2020 CRA CAR Allowance Rate?
The 2020 CRA Mileage Rate has increased by one cent to 59 cents per kilometer for the first 5,000 kilometers driven, and to 53 cents per kilometer for each additional kilometer.
What is the 2019 CRA CAR Allowance Rate ?
The CRA Mileage Rate has increased in 2019:
- 58¢ per kilometre for the first 5,000 kilometres driven
- 52¢ per kilometre driven after that
With the 2019 CRA Mileage Rate changing from the 2018 CRA Mileage Rate by 3 cents for the year, there looks to be a lot more saving when driving your car for business purposes. Looking back at the rates from 2013 to 2018, it has either gone up or down by one cent or stayed the same from one year to next. It’s important to note that all Canadian provinces and territories have the same rate, except for Northwest Territories, Nunavut and Yukon, which has been $0.04 more per kilometer.
CRA Rules for Deducting Business Mileage
Whether you are an employee or self-employed, the CRA has rules in place which must be followed for your business mileage to be deducted on your tax return, and they are pretty strict on these rules, so let’s review.
- You're required as part of your job to work away from the office regularly. This is a safeguard put in place to make sure you’re not deducting your office commute. For instance, if you live in the suburbs and work in the city, and you’re not required to drive for your business, you cannot claim mileage deductions for this drive. This will be the same when the 2019 CRA Mileage Rates.
- You pay out-of-pocket for work-related travel. Your employer would need to sign a T2200 form confirming that you pay for your own business travel. If your employer reimburses you for your travel expenses, then you cannot your deduct your business mileage. Even worse, if the reimbursement (or allowance) is above what the CRA deems acceptable, then your employer would be required to report the extra amount as the employee’s (your) income.
Keep CRA Compliant in 2020 with a Mileage Tracker
The CRA recommends that every person or business attempting to deduct their allowance keep a detailed and accurate log of the business mileage they rack up. This is important, as there have been instances where the CRA has declined mileage logs due to incomplete or inaccurate information.
By using a mileage tracker app, such as Everlance, you can rest assured that all your business mileage will be automatically recorded as you’re driving, and you’ll be able to download detailed reports when it’s time to prepare your taxes.
The best part is that Everlance is not just a business mileage tracker. This time-saving app also records all other types of business travel expenses, including parking, tolls, meals while traveling, and more. You can take photos of receipts with your smartphone, enter in amounts manually, or link your credit card or bank account, so each and every deductible expense is captured, recorded and stored into a downloadable report. This data can then be uploaded to your favorite tax software or given to your accountant.
While taxes are never fun, Everlance makes it less troublesome for businesses and employees. Take comfort in knowing that you’ll have detailed records and reports of all your deductible expenses, and even better, you’ll save a ton of time and have fewer headaches for the when tax time rolls around.
For US based customers learn more about the IRS Standard Mileage Rate.