Do I have to include a car allowance that I receive from my employer in my income?

An automobile allowance paid by an employer to his employee is taxable to the employee, unless it is based on actual kilometers driven by the employee. For example, a flat monthly car allowance of $500 would be a taxable benefit to the employee, and should be included in the employee’s T4 slip.

For an employer provided car allowance to be tax-free to an employee, it must beet the following conditions:

• The allowance is based only on the number of business kilometers driven in a year.
• The rate per-kilometer is reasonable. For 2013, the CRA considers this to be:
• 54¢ per kilometer for the first 5,000 kilometers driven; and
• 48¢ per kilometer driven after that.
• You did not reimburse the employee for any car expenses (except for toll charges and parking)

ABOUT THE AUTHOR

ALLAN MADAN

CA.CPA.CGA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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