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## Understanding the Proposed Changes in Mileage Reimbursement

My employer has recently presented a new proposal to switch from a standard mileage reimbursement system to one that includes a base rate payment along with a per kilometer payment.

Previously, we were only reimbursed based on the number of kilometers driven.

The proposal suggests a monthly payment of $1000 in addition to a rate of $0.35 per kilometer.

The breakdown of the previous reimbursement system was $0.48 per kilometer.

This change has raised questions about the tax implications of the new system. I have been informed that the $1000 base rate is tax deductible, which in turn affects the net amount received.

On average, I drive between 45,000 to 55,000 kilometers annually.

One of the concerns raised is whether this new reimbursement structure will result in additional taxation, especially considering that the Canadian Revenue Agency (CRA) standard rate for mileage reimbursement is $0.64 per kilometer.

Does this mean that the entire payment above the CRA rate will be subject to taxation, or is it only the excess amount that will be taxed?

Any assistance or insights on navigating this situation would be greatly appreciated.

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4 Comments

  • FelixYYZ

    >Proposed $1000/month plus .35/km

    >I’ve been informed that the $1000 is tax deductible meaning I only see some of that.

    You mean taxable not tax deductible.

    So the allowance (the $1k) is taxable and the low mileage amount just makes the deal bad as they haven’t mentioned the T2200 form yet.

    You should just ask for as close to $0.70 per km which is the 2024 number (https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-allowances/automobile/automobile-motor-vehicle-allowances/automobile-allowance-rates.html) as you can and this way the amounts not taxable since it’s a reimbursement for kms.

  • Constant_Put_5510

    The suggested number is .70 on first 5000 km. Then .64 on balance. Companies don’t have to use a suggestion from the government.

  • whocakedthebucket

    There’s a few scenarios in this article that would help. https://www.canada.ca/en/revenue-agency/news/cra-multimedia-library/businesses-video-gallery/transcript-automobile-and-motor-vehicle-allowances.html#

    Any mileage rate too low, or combined flat rate plus mileage rate would be taxable.

  • jellicle

    Companies are allowed but not required to reimburse up to the CRA rate (already linked in this thread), which is deemed to be a valid amount to reimburse you for gas and wear and tear on the vehicle, and isn’t taxable if supported by documentation indicating you actually drove those km for work.

    Giving you $1000 with no particular receipt being reimbursed would be taxable. It’s just salary.

    So for you, this takes your mileage-related income from $24,000 non-taxable to $1000 taxable plus $17500 non-taxable, so it’s a cut in your pay of about $6,000.