How to Deduct Toll Expenses on your Taxes
Many Canadian provinces have phased out toll roads and bridges, but there remain a few scattered across the country. Did you know toll expenses may be deductible when counted among eligible business-related motor vehicle expenses?
Here’s how to claim the deduction with your next tax filing.
Are tolls tax deductible?
If you pay tolls going to and from your usual place of business, those expenses are not deductible. However, if you go on a business trip, then toll expenses would be deductible.
If you have a vehicle you use for business purposes, you could deduct toll expenses even if you only use it for work some of the time.
The best method of toll tracking is to keep a detailed logbook of business-related motor vehicle expenses. When you know the precise amount of your toll bill, and when you had to pay it, eligible deductions become clear.
Keeping records to support motor vehicle expense claims
The Canada Revenue Agency (CRA) recommends keeping a logbook for business travel throughout the year. The logbook should document each business trip, including destination, purpose, and mileage.
If you do not maintain such a logbook, and the CRA asks you to support motor expense claims, investigators would also consider the following forms of evidence:
- Appointment diary with addresses
- Purchase or sales invoices
- Whether you have another vehicle for personal travel
- Type of vehicle
- Nature of business and business travel likely required
- Who else might drive the vehicle (e.g., family)
- How the automobile is insured
- Indications of other personal travel.
Recall that there are different ways to report motor vehicle expenses, depending on whether you are self-employed, a salaried worker, and whether you use a company-provided vehicle or your own.
Deducting toll expenses for salaried and commission-based employees
Let’s say you use a car for business purposes, and you usually deduct the following eligible expenses:
- Maintenance and repairs
- License and registration fees
- Capital cost allowance
- Qualified interest on car loans
- Eligible leasing costs.
After entering the above motoring expenses into Form T777 Statement of Employment Expenses, use Line 12 “Other expenses” to write in applicable toll costs. Remember to get this form signed by your employer before submitting to the CRA.
Toll roads in Ontario
In February 2017, the Ontario government announced new tolls on Highway 407 and Highway 412. Their rationale was that the funds raised would go toward Ontario road infrastructure. The 407 ETR (Express Toll Route) uses sophisticated tracking technology to mark entry and exit points.
Toll scandal in British Columbia
In British Columbia, car insurance brokers found a way to circumvent BC tax law, using fake codes to indicate drivers had paid their toll bills when in fact they had not. The Insurance Council of BC issued fines to some brokers and suspended others. Paying your toll bill in full is a legal prerequisite to renewing your car insurance in BC.
Using a toll calculator
If you avail yourself of an online toll calculator, you might be in a better position to plan your route with savings in mind. Get to know your local toll rates so that, even if you miss a log entry or two, you can always go back and check so that you have all the information you need to keep your records complete.
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