The institution in charge of drawing up and enforcing tax laws is the Canada Revenue Agency (CRA). This authority should be consulted in issues regarding the legal framework for reimbursing your employees tax-free.
This article will address the CRA mileage rate and taxpayers’ automobile income tax deduction limits in 2024. We’ll also discuss how to reimburse employees adequately while keeping your expenses in check.
The CRA mileage rate for 2024 is set at 70 cents for the first initial 5,000 kilometers and 64 cents for each subsequent kilometer.
However, CRA rates are slightly higher in Canadian Territories (the Northwest Territories, Yukon, and Nunavut) being 74 cents for the first initial 5,000 kilometers and 68 cents for each additional kilometer.
Timeero tracks your employees' kilometers and routes accurately.
The Canada Revenue Agency (CRA) establishes an annual per-kilometer rate to be used as a guideline for Canadian employers to follow when setting the rate at which they reimburse their employees.
Implementing the CRA mileage rate isn’t mandatory, meaningbusiness owners can pay more or less than the recommended amount for motor vehicle expenses. It’s worth mentioning that this tax law has nothing to do with employment regulations. Therefore, it doesn’t specify the minimum amount an employer has to pay their employees for any work performed while using their personal vehicles for business purposes.
The CRA mileage rate is the highest per business kilometer rate at which you can reimburse your employees while still being able to receive a tax deduction.
Employers typically stick to this prescribed rate for practical reasons, as it allows them to compensate their employees fairly while simultaneously cutting their tax bill.
Note: If you reimburse your employees at a higher rate, any excess payment is considered taxable income.
What Are Other Automobile Deduction Limits You Can Take Advantage Of?
Business owners and self-employed individuals in Canada are also eligible for other automobile deduction limits. This tax deduction is referred to as capital cost allowance (CCA), which allows you to recover the cost of the vehicle over several years as it depreciates.
The CRA groups different types of vehicles into classes and assigns a percentage to each class. This percentage is called the CCA rate which represents how quickly a vehicle depreciates.
The limit on capital cost changes every year too. Here are the latest CRA stipulations:
If your vehicle belongs to Class 10.1, the capital cost allowance limit is increased from $36,000 to $37,000. This limit applies to new and used vehicles purchased on or after January 1, 2024.
The capital cost allowance limit for Class 54 zero-emission passenger vehicles will be $62,000 before tax, remaining the same as the previous year. This limit applies to both new and used vehicles purchased on or after January 1, 2024.
For new leases signed on or after January 1, 2024, the deductible costs will increase from $950 to $1050 per month before tax.
For new automobile loans signed on or after January 1, 2024, the maximum allowable interest deduction will be increased from $300 to $350 per month.
Mileage Reimbursement Example Using the CRA Mileage Rate for 2024
Let’s calculate the mileage reimbursement amount for an employee together.
Your employee Dave drove 1,500 kilometers throughout the year. The CRA mileage rate for 2024 stands at 70¢ for the first 5,000 kilometers driven.
To calculate Dave’s reimbursement we would follow the formula below:
CRA Rate x km driven = Reimbursement amount
0.70 cents x 1,500 km =$1,050
In this case, $1050 is the maximum non-taxable reimbursement amount you can issue to your employee who drove 1,500 kilometers in a tax year.
An additional 4¢ per kilometer in the Northwest Territories, Yukon, and Nunavut
The increase in CRA Mileage Rates results from higher driving costs. The CRA adjusts the rate to account for inflation as well as fuel prices, maintenance, insurance, and repair costs. The agency takes into account all factors of owning a vehicle when calculating the CRA mileage rate.
The CRA mileage rate is higher in the Northwest Territories, Yukon, and Nunavut because these regions are considered prescribed northern zones with higher travel costs than other parts of Canada. The additional 4¢ per kilometer added to the standard automobile allowance rates, reflects higher vehicle operating expenses in these areas, such as fuel, maintenance, insurance, and depreciation.
Higher costs in these regions are due to factors such as, harsh climate, limited infrastructure, distance from major urban centers, and a lack of competition among suppliers.
What Was The CRA Mileage Rate In 2022?
The CRA mileage rate in 2022 was set at:
61¢ for the first 5,000 kilometers driven
55¢ after the first 5,000 kilometers
An additional 4¢ per kilometer in the Northwest Territories, Yukon, and Nunavut
What Are The Mileage Reimbursement Rules For Employers In Canada?
When discussing mileage reimbursement in Canada and the CRA mileage rate for 2024, it’s important to define in which cases employees are entitled to these expenses.
Do I Have To Reimburse My Employees?
Legally speaking, you don’t have to. It all depends on your agreement or contract with the employee.
Even though no law requires you to reimburse your employees for the business use of their personal vehicle, there’s no reason why you shouldn’t cover these expenses.
It’s very unlikely that someone would be okay with using their personal vehicle for business purposes without being adequately compensated. Employees aren’t just concerned about fuel costs, but vehicles lose their value pretty quickly. For example, most new cars lose 20% of their value over the first year. After five years, a typical car’s value will drop to only 40% of its initial value. If you want to attract quality employees and retain them, you should create a fair mileage reimbursement policy.
Keep in mind, your company can claim a mileage tax deduction at the end of the year if you choose to issue mileage reimbursements. Not only will you keep your employees happy by offering compensation, but you’ll also benefit from tax write-offs.
Do Your Employees Qualify For Mileage Reimbursement?
If your employees use their personal vehicles for business-related purposes, you can decide to reimburse them for any expenses they paid out of their own pocket.
Here are some examples in which your employees qualify for CRA mileage reimbursement:
Commuting between different work locations, such as construction sites or client homes
Picking up or delivering work-related items
You probably notice that commuting from home to work and vice versa isn’t listed as a reimbursable expense and isn’t constituted as a taxable benefit. The reason for this is straightforward: the CRA, like its U.S. equivalent, the IRS, considers an employee’s home location their choice and is therefore not responsible for covering mileage expenses related to commuting.
Can My Company Claim A Mileage Tax Deduction?
As we’ve already established, the answer is yes.
If your employees use their personal vehicles for work-related purposes and you reimburse them for these expenses, your company can claim a write-off on the taxes.
However, there are some rules that need to be followed to qualify for a mileage tax deduction.
Paying a reasonable per-kilometer allowance
Apart from using the prescribed CRA mileage rate for 2024, an allowance will be considered reasonable and tax-deductible only if:
It covers the yearly amount of kilometers driven solely for business purposes.
It’s based on a reasonable per-kilometer rate.
The employee hasn’t already been reimbursed for the same use of their vehicle. This doesn’t refer to reimbursing tolls or additional travel insurance that weren’t included in this allowance.
It’s worth mentioning that a reasonable per-kilometer allowance isn’t treated as income, so your employees won’t have to include it in their tax returns.
Using a company car
The situation is more complex if your employees use company cars.
In this case, it really depends on who covers operating expenses and whether the cars are used for business purposes only. That’s why it’s best to consult your accountant on how to maximize your tax return.
A flat-rate car allowance
A flat-rate vehicle allowance that isn’t calculated based on the number of kilometers driven is considered taxable income.
Since this is a lump sum you give to your employees in advance, it can’t be averaged at the end of the year and translated to a per-kilometer allowance to be excluded from the employee’s income.
However, the CRA allows a workaround to help you handle this situation without needing to include a flat-rate allowance in your employee’s income. Find out more about how to average allowances here.
Best Practices For Implementing The CRA Mileage Rate
To claim your tax deduction, you must substantiate that you’ve properly implemented the standard mileage rate. You must also prove that your business mileage records are accurate.
How To Stay CRA-Compliant
According to the CRA, keeping a detailed logbook for the entire year is the best way to provide evidence about your business travel and substantiate your mileage claim.
Whenever you or your employees use a personal vehicle for business purposes, the following information should be entered in the logbook to stay compliant:
Date of the trip
Starting location
Destination
Trip purpose
Mileage at the start of the trip
Mileage at the end of the trip
Total kilometers driven
Best Practices For Implementing The CRA Mileage Rate
To claim your tax deduction, you must substantiate that you’ve properly implemented the standard mileage rate. You must also prove that your business mileage records are accurate.
How To Stay CRA-Compliant
According to the CRA, keeping a detailed logbook for the entire year is the best way to provide evidence of business travel and substantiate your mileage claim.
Whenever you or your employees use a personal vehicle for business purposes, the following information should be entered in the logbook to stay compliant:
Date of the trip
Starting location
Destination
Trip purpose
Mileage at the start of the trip
Mileage at the end of the trip
Total kilometers driven
How Do You Make Sure Reimbursements are Accurate?
The best way to cut your company car expenses and ensure your employees aren’t reporting their personal driving as business miles is to have them do the following:
Keep a logbook with the previously mentioned details
Track mileage
Submit reports on time
Save all documentation related to their business trips. The CRA can conduct an audit and request to check all data, such as odometer readings, toll receipts, traffic cameras, and additional business expenses.
Keeping thorough records encourages employee accountability, allows you to properly reimburse workers, and prevent any issues with the CRA.
But, this is easier said than done, especially if your employees enter details manually with pen and paper. Not to mention that this method is error-prone, which can lead to inaccurate records.
Using a robust mileage tracking app like Timeero helps you streamline mileage reimbursement in Canada. An automatic mileage tracking app keeps your business CRA compliant while eliminating the need for manual data entry.
Timeero’s mileage logs keep your business CRA compliant.
Timeero takes the guesswork out of employee mileage. You no longer need to rely solely on your employees’ word when it comes to the accuracy of their mileage logs or worry if they are taking longer routes. Timeero’s GPS-tracking technology can show you the real-time location of each of your employees. All your workers need to do is clock in at the start of their shift and Timeero automatically tracks their location.
If your business chooses to use Timeero’s geofencing technology, the app will remind your employees to clock in or out once they approach or exit the geofence boundary. This feature discourages time fraud and inaccurate mileage reporting.
Track your employees' work hours, location, and mileage with ease.
If you need to replay entire routes to see where your employees have driven while performing business tasks, the breadcrumb trail feature shows you every stop your worker has taken during their shift.
Timeero’s Segmented Tracking shows you an employees’ entire workday details at a glance.
Timeero works offline and doesn’t require installing expensive hardware.
Since Timeero automatically captures the location, date, and purpose of each trip, the app is a great choice for companies that need to track the mileage of their entire workforce.
The best mileage tracking apps also keep a detailed log of any changes made to an employee’s time or mileage records, which prevents potential disagreements and promotes transparency.
How To Claim Mileage On Taxes In Canada
The CRA is very strict and persistent in preventing excessive claims for business uses of personal cars. The Agency tends to scrutinize the cases in which all or most mileage driven is claimed as business use.
If an audit is requested, you’ll need to determine exactly how many non-business-related miles/kilometers every employee drove and be able to prove this.
To figure this out, determine the total miles/kilometers that were driven using the odometer readings at the beginning and end of the tax year and calculate the difference between the two. Next, subtract the number of business miles/kilometers driven in that period from the total miles/kilometers driven to calculate personal mileage.
Implement A Policy For The Personal Use Of Company Vehicles
If your employees use company vehicles, it’s important to monitor mileage and separate business-related miles from personal miles/kilometers.
Don’t forget that commuting from home to work isn’t considered business-related travel, so it’s taxable.
It’s important to have a policy in place that will allow you to claim mileage with the CRA.
This policy should outline the following:
Who can drive the vehicle - is it only the employee or can their spouse drive the vehicle too?
Is personal use allowed, and to what extent? Define what’s allowed and what’s not. For example, explain whether your employee can use the company vehicle for a family trip.
Specify how employees should keep mileage records. To respect privacy, we discourage tracking employees outside of work hours. As a solution, you can use Timeero. This tool allows tracking of mileage or kilometers exclusively during work hours, ensuring both accuracy and privacy.
Besides tracking mileage and separating business trips from personal use, you and your employees must keep the following relevant documentation:
Receipts for expenses such as gas, oil, repairs, insurance, or any other operating and maintenance costs
Vehicle registration certificate
Lease contract and documentation, if applicable
Tax invoices
The method you used to determine your claim, i.e., if you used the CRA mileage rate for 2024 or something else
Understanding The 2024 CRA Mileage Rate
Making sure your employees are fairly reimbursed for driving their personal vehicles for business-related purposes, while simultaneously lowering your expenses can be challenging.
Using the CRA mileage rate will allow your employees to receive proper reimbursement. At the same time, your company will benefit from tax deductions on these business mileage reimbursements.
A tool like Timeero streamlines the entire process of mileage tracking. With its automated tracking feature, the app keeps accurate records without relying on any manual intervention. The seamless submission process simplifies mileage tracking for your employees and allows you to focus on other important aspects of your business without worrying about the accuracy of mileage records.
2024 CRA Mileage Rate: FAQ
What is the 2024 CRA mileage rate in Alberta?
The 2024 CRA Mileage Rate in Alberta is set to 70 cents per kilometer for the first 5,000 kilometers driven and 64 cents for each extra kilometer. The per-kilometer rate is the same across Canada, except for Territories.
What is the 2024 CRA mileage rate in Ontario?
The 2024 CRA Mileage Rate in Ontario is set to 70 cents per kilometer for the first 5,000 kilometers driven and 64 cents for each additional kilometer, the same as in other parts of Canada, except Territories.
Capture mileage in real-time and avoid inaccurate reporting with Timeero.
Andjelka is a skilled researcher and writer with 6+ years in digital marketing, specializing in SaaS and B2B content. With a background in sociology, social work, and journalism, she crafts strategy-driven content that resonates with audiences. Outside of work, she enjoys yoga, swimming, and relaxing with her cats and Leonard Cohen’s music.
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