On February 12, the simplified method rates for calculating deductible auto and meal expenses for various important provisions on the 2018 tax return were finally released by the CRA. It’s an important missing piece for tax professionals and taxpayers alike, that in prior years was generally released in January.
Taxpayers can use these the prescribed rates to calculate and claim the northern resident travel deduction; or meal and vehicle expenses related to moving and medical travel. As in prior years, either the simplified or detailed method can be used to calculate and claim these deductions, but it’s important to choose the method that will maximize your tax refund.
Which method should you choose? The goal is to use the method – detailed or simplified - that will give you the highest tax deduction or credit. For travel expenses, the simplified method usually results in a larger claim. For meals, the detailed method usually results in a larger claim.
What is the detailed method? Under the detailed method, you have the option to calculate and claim the actual costs of your eligible meal and eligible vehicle and meal expenses, including fixed costs like depreciation, interest or leasing costs. But, to do so you must have retained your receipts and a travel log outlining depicting eligible travel for the various provisions vs. the total distance driven for the year.
What is the simplified method? For vehicle expense claims, the advantage is that you don’t need to have receipts, but the distance log is necessary. To calculate your claim using this method, multiply the eligible number of kilometres driven (during the tax year) by the rate below:
This year, most provinces and territories saw a three cent per kilometer increase in vehicle rates. The largest increases were for the Northwest Territories and the Yukon— their rates went up four cents from 2017. Nunavut saw the lowest increase of only half a cent per kilometre.
What's claimable for meals? To claim eligible meal expenses under the simplified method, you simply claim $17 per meal, to a maximum of $51 per day (sales tax included) per person. This rate remains unchanged from last year.
What moving expenses are eligible? According to the CRA, meal and vehicle costs can typically be claimed (using either method) if your move met both of the following criteria:
What medical travel expenses are eligible? If equivalent medical services weren’t available near your home and you took a reasonably direct route to get there, but travelled more than 40 kilometers each way, you may be eligible to claim public transportation costs or vehicle expenses. If you had to travel more than 80 kilometers each way, you may be able to claim meal, accommodation and parking expenses. Additional eligibility information is available on the CRA website.
If you have travel expenses related to medical services and you also qualify for northern residents deductions (line 255 of your tax return), you may be able to choose how to claim your expenses. For more information, see Form T2222, Northern Residents Deductions.
Make sure you’re using the best method to maximize your tax refund – consult with a DFA – Tax Services Specialist.
Additional educational resources: Are you a tax pro? Share this resource with your clients, and be sure to subscribe to Canada’s most comprehensive and easy-to-use online tax research library. It will help you get the straight line to the answers you need throughout tax season and beyond into audit-defence season! It’s very affordable and a free trial is available!
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