T2200 and T777: Employee Vehicle Expenses in Canada

Most employees cannot deduct anything for their car. The drive to work is personal, and the CRA says so plainly. But an employee whose job sends them out in their own car, and who is left to pay for it, is in a different position. The Income Tax Act lets that employee deduct part of what the car actually costs, and the form it goes on is the T777.

The question people search is "can employees deduct mileage?", and the honest answer has two halves. Yes, some employees can deduct vehicle costs. No, not as mileage: nobody on a T777 multiplies kilometres by the CRA's per-kilometre rate. The claim is your real costs times the share of your driving that was for work, and it only exists if your employer signs a form saying the conditions were met.

This page sets out the conditions as the Act writes them, what the employer's form covers, how the claim is calculated, and one year worked through.

The four conditions

The deduction is paragraph 8(1)(h.1) of the Income Tax Act. Read together with subsection 8(10), it comes to four conditions, and you need all of them for the year.

1. You were ordinarily required to carry on your duties away from your employer's place of business, or in different places. The CRA reads "ordinarily" as customarily or habitually, not continually, but it expects some regularity. A "place of business" is a permanent establishment such as an office, a factory, a warehouse, a branch or a store. "In different places" covers an employer with no single fixed place of business, such as a school inspector travelling from school to school.
2. Your contract of employment required you to pay your own motor vehicle expenses. Your employer confirms this on the T2200 (condition 4). The CRA adds that you are not treated as having paid your own vehicle expenses if your employer reimburses you, or if you refuse a reimbursement or a reasonable allowance your employer offered.
3. You did not receive an allowance for motor vehicle expenses that was left out of your income under paragraph 6(1)(b). In practice, that means a tax-free allowance. More on this below, because it is the condition that decides most cases.
4. Your employer certifies, on the prescribed form, that the conditions were met. That form is the T2200, Declaration of Conditions of Employment. Subsection 8(10) makes the certification a condition of the deduction itself. The CRA's instruction is that you keep the signed form rather than send it, and produce it if asked.

There is also a fifth, quieter limit in the Act's wording: the deduction covers motor vehicle expenses "incurred for travelling in the course of the office or employment". That phrase is where the commute falls out.

Commission employees: paragraph 8(1)(f)

If you sell property or negotiate contracts for your employer and are paid at least partly by commission based on sales volume, you may instead claim under paragraph 8(1)(f). Its conditions are close to the ones above: your contract required you to pay your own expenses, you were ordinarily required to work away from the employer's place of business, you were paid in whole or in part by commissions, and you did not receive a tax-free travel allowance. The T2200 is required here too.

The differences, briefly:

• 8(1)(f) covers more than the car. Advertising and promotion, for example, can be deducted under it.
• It is capped. Apart from interest and capital cost allowance on your vehicle, the total you deduct under 8(1)(f) cannot exceed the commissions you received in the year.
• You pick one route for the year. Paragraph 8(1)(h.1) does not apply for a year in which you claim under 8(1)(f). The CRA's guide T4044 points out that a commission employee whose expenses exceed their commissions may be better off claiming as a salaried employee under 8(1)(h) and (h.1), which gives up expenses such as advertising but lifts the cap.

The vehicle arithmetic is the same on either route.

What the claim is: your costs times your work share

The claim is your actual costs for the year multiplied by the share of your kilometres that were driven to earn employment income. It is the same calculation a self-employed person makes on the T2125.

The costs the CRA lists for employees are:

• fuel (including electricity), maintenance and repairs
• insurance
• licence and registration fees
• capital cost allowance on a car you own
• eligible interest on a loan used to buy the car
• eligible leasing costs on a car you lease

Paragraph 8(1)(j) is what lets an employee who can claim under 8(1)(f), (h) or (h.1) deduct interest and capital cost allowance. For a passenger vehicle, the CRA's limits on capital cost allowance, interest and leasing costs apply to an employee too, and they are covered in the capital cost allowance guide. Your costs include the GST/HST or PST you paid, and you may be able to get a rebate of the GST/HST portion.

The T777 walks you through this in its chart for line 3. On the 2025 edition of the form that chart asks for the kilometres you drove to earn employment income (line 18), the total kilometres you drove (line 19), divides one by the other (line 20), lists the costs on lines 21 to 29, and multiplies (line 30). The result is your allowable motor vehicle expenses, which go on line 3 of the T777 (code 9281). The T777's total goes on line 22900 of your return.

Parking is separate. It goes on its own Parking line of the T777, not inside the vehicle chart, so it is not prorated. The CRA's position is that you can deduct parking related to earning employment income, but generally not parking at your employer's office, which is a personal cost, and so are traffic tickets.

One claim per vehicle. If you use more than one car for work, the calculation is done for each car separately, with its own kilometres and its own costs.

Why not kilometres times the rate?

Because nothing in 8(1)(h.1) allows it. The CRA's archived bulletin on employee vehicle expenses, IT-522R, says in so many words that a claim for motor vehicle expenses calculated on a cents-per-kilometre basis is not acceptable. The per-kilometre rate in section 7306 of the Income Tax Regulations is the ceiling on what a payer deducts for an allowance, and the CRA's usual benchmark for a reasonable one. Who can actually use the CRA mileage rate covers it in full. On a T777, it has no role.

The commute is still personal

This is the rule that trims most employee claims. The CRA's guide is direct: it considers driving back and forth between home and work as personal use. IT-522R says the same thing, that travelling between the employee's home and the place of employment is personal travel and the expenses relating to it are not deductible.

So a typical day for an employee who reports to an office and then goes out looks like this:

Leg	Treatment
Home to the employer's office	Personal
Office to a client, customer or site	Employment
Client to client, or site to site	Employment
Last call back to the office	Employment
Office to home	Personal
A detour for errands on the way	Personal for the extra distance

What the CRA does not set out in these publications is a separate rule for a day that starts at home and goes straight to a customer, without calling in at the office. That case depends on the facts of the job: where you normally report for work, and whether the first stop is part of your duties or a stand-in for the office. If it is a large share of your driving, record exactly where each day began and why, and get advice rather than assuming the favourable answer. The self-employed version of the same line, which turns on different tests, is in commuting versus business driving.

What the T2200 asks your employer

The T2200 is filled in and signed by your employer, not by you. It is the CRA's record of the employer's side of the conditions, and the answers on it have to line up with your claim. For motor vehicle expenses, the questions that matter are these:

• Did the contract require you to pay your own expenses? The employer answers yes even if it gives an allowance or reimbursement for some of them. A "no" ends the form, and your claim with it.
• Were you paid by commission? If so, how much, and whether a commission account paid or reimbursed your expenses.
• Did the employer normally require you to travel to places that were not its place of business, or between its locations? And if so, the area you covered.
• Did you receive, or were you entitled to receive, a motor vehicle allowance? The form asks for any fixed amount, any per-kilometre rate and amount, and how much of the allowance was included on your T4.
• Did you have the use of a company vehicle, and were you responsible for any of its expenses?
• Were you reimbursed for expenses, and were you required to pay other expenses with no allowance or reimbursement?

The employer's authorized person signs the declaration, and the CRA accepts an electronic signature applied according to its guidance. Keep the signed form with your records.

Two practical consequences follow. First, the T2200 is where an allowance shows up, so a claim filed while the form reports a tax-free allowance is a mismatch. Second, the form states the area you travelled, which is the first thing to compare with your logbook.

The allowance is either/or

If your employer pays you a per-kilometre allowance that is reasonable and based only on the kilometres you drove for work, it is generally not taxable to you. That tax-free allowance is condition 3 above: receive one and the T777 vehicle claim is not available for that car. You cannot take the tax-free allowance and then also deduct your costs.

If the allowance is taxable (a flat monthly amount not tied to kilometres, for example, which is included on your T4), the bar does not apply, and you can claim your actual costs if the other conditions are met. The CRA's guide also allows one crossover: if you received a tax-free allowance but can show your work-related vehicle expenses were higher, you can include the allowance in your income voluntarily and then claim the expenses.

How an allowance ends up taxable or tax free, and which way works out better, is the subject of its own post: taxable versus non-taxable car allowances for employees.

The logbook is the same one the self-employed keep

The CRA's employee guide asks for the same record it asks of a business: for each car, the total kilometres driven in the year and the kilometres driven to earn employment income, with the date, destination, purpose and number of kilometres of each work trip, and the odometer reading at the start and end of the year. If you change cars during the year, record the odometer of each one when you buy, sell or trade it, with the dates.

Keep the log, your receipts and the T2200 for at least six years from the end of the tax year they relate to. None of it is sent with your return, and the CRA may reduce your claim if you cannot produce it.

The field-by-field detail is in what a CRA-acceptable logbook contains, and the purpose column is where most logs fail: "work" tells a reviewer nothing, while a client name or a site address answers the commuting question on its own. Claimable Drive, in beta for iPhone, records drives in the background, lets you swipe each one business or personal, and works out the percentage from those swipes.

Worked example: a home-care therapist in her own car

Aisha is a salaried occupational therapist employed by a home-care agency. She sees clients in their homes across the city in her own car. Every morning she picks up her schedule and files at the agency's office, drives her visits, returns to the office at the end of the day, and drives home. She is not paid by commission.

Her employment contract requires her to pay her own vehicle costs. The agency pays no allowance and no reimbursement for the car, and it signs a T2200 saying so. The car is paid off, so there is no loan interest. To keep the arithmetic on the running costs, this example leaves out capital cost allowance; if she claims it, it goes through the same percentage.

Her kilometres for the year

	Kilometres
Office to clients, between clients, and back to the office	15,000
Home to the office and back	2,760
Other personal driving	6,240
Total, from her odometer readings	24,000

Her work share is 15,000 ÷ 24,000 = 62.5%. The 2,760 kilometres between home and the office are her commute, and they are personal.

Her costs and her claim

Cost	Amount
Fuel	$3,100
Insurance	$2,000
Maintenance and repairs	$1,100
Licence and registration	$120
Total motor vehicle expenses	$6,320

$6,320 × 62.5% = $3,950. That is her allowable motor vehicle expenses on line 3 of the T777.

She also paid $180 to park at clients' buildings. That goes on the Parking line in full, not through the percentage, so her T777 total is $3,950 + $180 = $4,130, and that is the amount on line 22900 of her return.

If she had logged the commute as work

Suppose her log had counted the drive to and from the office as work driving. Her work kilometres would read 15,000 + 2,760 = 17,760, and her percentage 17,760 ÷ 24,000 = 74%.

	Logged with the commute	Corrected
Work kilometres	17,760	15,000
Work share	74%	62.5%
Vehicle expenses claimed ($6,320 × share)	$4,676.80	$3,950.00

The difference is $726.80 of deduction, and on review every cost line would be restated at the corrected share, with interest on the tax.

If the agency had paid an allowance instead

Now suppose the agency paid Aisha a per-kilometre allowance for 2026 at the section 7306 rates, on her 15,000 work kilometres: 5,000 × $0.73 = $3,650, plus 10,000 × $0.67 = $6,700, for $10,350. The CRA generally considers an allowance at those rates reasonable, so if it is based only on her work kilometres and not doubled up with a reimbursement for the same driving, it is tax free. She would not report it, and she would not file a T777 vehicle claim for that car. The comparison is between two routes, not two amounts to be added.

FAQ

Can an employee deduct mileage in Canada? Not as mileage. An employee who meets the conditions in paragraph 8(1)(h.1) deducts a share of their actual vehicle costs on Form T777, based on the kilometres driven for work divided by total kilometres. The CRA does not accept a claim calculated as kilometres times a per-kilometre rate.

Do I need a T2200 to claim vehicle expenses? Yes. Subsection 8(10) of the Income Tax Act makes the employer's certification on the prescribed form a condition of the deduction. Your employer completes and signs the T2200; you keep it with your records and produce it if the CRA asks.

What if my employer will not sign a T2200? Then the deduction is not available, because the certification is a condition in the Act. The form records facts about your job, so the conversation to have with your employer is about those facts, not about the form.

I get a car allowance. Can I still claim on the T777? Only if the allowance is taxable, or if it is tax free but your vehicle costs were higher and you choose to include the allowance in your income. A tax-free allowance on its own rules out the T777 vehicle claim for that car.

Can I claim capital cost allowance and loan interest as an employee? Yes, if you claim under paragraph 8(1)(h.1) or 8(1)(f): paragraph 8(1)(j) allows both, with the passenger-vehicle limits applying, and they go through the same work-share percentage as your other costs.

Sources

1. Income Tax Act, section 8, paragraphs 8(1)(f) (commission employees), 8(1)(h.1) (motor vehicle travel expenses and the allowance exception), 8(1)(j) (interest and capital cost allowance), and subsection 8(10) (the employer's certification on the prescribed form).
2. Income Tax Act, section 6, paragraph 6(1)(b), allowances excluded from an employee's income.
3. CRA Guide T4044, Employment Expenses, the conditions for salaried and commission employees, the refused-allowance rule, the voluntary inclusion of an allowance, parking, the list of deductible vehicle costs, the commute as personal use, the logbook and odometer records, and the six-year retention rule.
4. CRA Form T2200, Declaration of Conditions of Employment, the employer's questions on expenses, travel, allowances and company vehicles, and the instruction to keep the form rather than file it.
5. CRA Form T777, Statement of Employment Expenses, the chart for line 3, the Parking line, and the total carried to line 22900.
6. CRA Interpretation Bulletin IT-522R, Vehicle, Travel and Sales Expenses of Employees, archived, paragraphs 13 (per-kilometre claims not acceptable), 14 (home to the place of employment is personal) and 32 (the meaning of "ordinarily", "place of business" and "in different places").
7. CRA, Line 22900, Other employment expenses, where employment expenses are claimed and the T2200 requirement.
8. CRA, Automobile or motor vehicle allowances provided to an employee for the use of their own vehicle, the conditions for a non-taxable allowance, the CRA's position that the section 7306 rates are generally reasonable, and the 2026 rates.