TL;DR — No, the flat mileage rate only applies to drivers in the US. This is a common misunderstanding for Canadian drivers as most mileage tracking apps are made for the US system, and Canada offers a flat rate deduction to “Employees”. Here, we will explain how Canadian drivers need to track their mileage, and how this can help you save this year on your taxes.
Why you should track your mileage
Vehicle-related expenses are typically the largest deduction you can claim as a gig driver. Every time you fill up gas, pay for insurance, or incur any of the tax-deductible costs related to your vehicle, you can claim that as a tax-deduction. This means you get to keep more of what you have earned at the end of the year. Using an app to track your mileage and expenses allows you to save a lot of time compared to tracking manually, and ensures you have all the information to claim your deductions.
How to do it correctly
In Canada, for each courier or rideshare shift you do, you must record the following information:
Date
Destination
Purpose
Kilometers driven
The total work-related km’s you record are then used to determine what percentage (%) of your vehicle expenses you can claim as deductions. So for example, if your odometer shows you drove 50,000 km this year and you have records of you having driven 37,500 km for work, you can deduct 75% of all your vehicle expenses. To learn more about how this works, read our guide here.
As opposed to the US where drivers can apply a flat rate to save on their work miles driven, in Canada you use the percentage (%) of work km’s and apply it to the vehicle expenses you have tracked. This is why mileage tracking apps that say “Your drives are worth $X after classifying” do not apply if you live in Canada.
The RideWiz App
If you are a rideshare or delivery driver in Canada, you can track all of the information the CRA requires automatically by downloading the RideWiz Mileage & Expense Tracking app and letting it run in the background. By simply creating an account and connecting your bank, both your mileage and relevant expenses are tracked for you throughout the year. You can claim your free trial through this link.
Why is there confusion?
When we consulted with the CRA before writing this article, we wanted to find out why there was uncertainty about the correct way to track mileage and be prepared in the event of an audit. The main source of confusion comes up because Canada does have a flat rate for mileage deductions, but it only applies to “Employed” workers; and as a rideshare or courier driver, you are considered Self-employed. Additionally, most mileage tracking apps available on the App Store are made by US developers and are meant for the US tax system which uses a flat rate, so Canadians who download these apps may not realize this does not apply in Canada.
For more information, these are the articles that the CRA provided us with:
Correct method for self-employed rideshare and courier drivers: See this resource.
Correct method for employers providing allowances/reimbursements to employees for the use of their own vehicle: See this resource.