• 52 cents per km for the first 5000 kms a year (no change from 2010)
• 46 cents per km for any excess (no change from 2010)
• 4 cents more in the Yukon, Northwest Territories and Nunavut

These reimbursements are not taxable, and should not be reported on the T4 slips, if the following conditions are met:

1. Specific and reasonable km reimbursement claims are made on a periodic basis, or
2. A log book is maintained by the employee and the total reimbursements for the year do not exceed “ministry kms” x “the CRA prescribed rates.”

If the total “vehicle reimbursements” paid to an employee in a year exceed the prescribed rates for ministry kms driven in the year, the entire amount must be added to the T4 slip, subject to CPP, EI and income tax withholdings. In this situation the employee may be able to deduct some vehicle expenses on his/her own income tax return if the employer provides a completed T2200.

If amounts paid in the year exceed prescribed rates the employee would have to pay back the excess prior to year end in order to avoid a taxable benefit. It’s not good enough for the employer to add the excess to the employee’s T4 slip as added salary. This problem of having to reconcile the actual kms driven at a later date can be avoided by requiring the employee to complete a mileage reimbursement claim every month. Such a claim should list the kms driven and the general purpose for the travel so that the charity can be satisfied that the claim is reasonable.

In certain circumstances a rate greater than the prescribed rates may be “reasonable” (e.g. driving in a foreign country where capital and/or operating costs are much higher than Canada). Organizations paying more than the prescribed rates for such reasons should carefully document their justification for doing so.

Additional comments:

1. The employer must be satisfied that a log book is being maintained and is available on request. Requiring that mileage reimbursement claims be submitted regularly (e.g. monthly) helps a lot.
2. Ministry mileage does not include driving to/from the church or office. However, a trip to or from the office that includes a stop for a ministry purpose would result in reimbursable mileage.
3. Subject to organizational policies, volunteers may be reimbursed for mileage including mileage to and from the charity’s place of ministry.
4. Driving an expensive luxury vehicle does not justify a higher rate, even though the cost of owning/operating may be higher than the prescribed rates. If a higher rate is paid, the entire amount reimbursed for mileage should be included in taxable income.
5. Kilometres in excess of the amount reimbursed by the employer may be carried forward to the next year.
6. CRA usually announces changes to the prescribed mileage rates, if any, in the last ten days of December.
7. Registered Canadian charities may claim a partial rebate of GST that is considered to be included in mileage reimbursements paid to employees and volunteers at the prescribed rates or less. GST is 5/105 of the amount reimbursed.
8. Similar to point 7 above, a partial rebate for HST is available as well.  The factor in this case is the HST rate divided by (100 plus the HST rate), for example: if HST is 13%, the factor is 13/113.  Once the HST is determined, the rebates available on the provincial and federal portions of HST can then be applied.
9. Please note that CRA’s prescribed rates are maximum for tax purposes. Charities with budgetary constraints may pay less, as long as these payments remain reasonable (i.e. they are not below the costs of operating the employee’s or volunteer’s automobile).

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