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Automobile Expenses Between Home Office and Engagements

Author: Brad Howland
First Posted: Oct. 15, 2005

Question

"I am a self-employed musician. A friend told me that I could not claim a deduction on my income tax return for automobile expenses relating to trips from my home to my engagements. Is this true?"

Answer

Not really. The automobile expenses are deductible if your home office/studio is your principal place of business, even though you go outside of the home to perform.

The Canada Revenue Agency (CRA) offers an example of a contractor who works outside the home, but keeps all of his/her business records, performs monthly bookkeeping, schedules jobs, does payroll, etc. from the home office. Even though the contractor spends a lot of time outside the home at various locations, the home office is the principal place of business.

The following comes from CRA Interpretation Bulletin IT525R (Consolidated) Performing Artists:

Where an artist is self-employed, the expenses incurred to earn professional income are deductible, to the extent that they are reasonable in the circumstances.

Examples of such expenses are as follows:

(i) transportation expenses related to an engagement (including an audition) in a situation where the engagement is out of town, in which case, board and lodging would also be allowed (see the current version of IT-518, Food, Beverages and Entertainment Expenses),

(ii) a large instrument or equipment must be carried to the engagement,

(iii) dress clothes must be worn from a residence to the place of engagement, or

(iv) one engagement follows another so closely that a car or taxi is the only means by which the engagement can be fulfilled;

Note that the above cases are presented as examples, and do not preclude other transportation expenses as being deductible, as long as they are reasonable!

It is true that travel from the home to a place of business is usually considered a personal expense and not allowed. However, when your principal place of business is located in your home, and you drive from your home to an engagement, you are in effect travelling from one business location to another—a legitimate tax deduction.

Interpretation Bulletin IT-521, Motor Vehicle Expenses Claimed by Self-Employed Individuals, states that:

24. Although expenses incurred in travelling between different premises of the same business are deductible by an individual who otherwise qualifies, expenses incurred by the individual for the purpose of travelling between the individual's home and place of business are not, unless it is established that the home is the base of business operations. If the individual has an office or other fixed place of business located elsewhere, the home is normally regarded as not being the base of business operations. The fact that all services are rendered at some other person's place of business does not necessarily make that place the individual's base of business operations. The individual's home may be the base of business operations even though a room therein is not set aside and used solely for the purpose of earning income. The following are examples of homes that may be regarded as the base of business operations:

(a) the home of a specialist in anaesthesia who performs all office functions of the practice at home, takes emergency calls there, renders all services to patients at one or more hospitals and has no office or other accommodation at the hospital or at any other place other than the home;

(b) the home of an independent real estate agent who has an office there, has no business accommodation elsewhere and renders services to clients at their homes or at the sites of real properties; and

(c) the home of a plumber, electrician or painter whose office is at home where all supplies are kept, who has no other place of business and who renders all services to customers at whatever places are necessary to fulfill contractual obligations.

It is quite clear from the above that automobile expenses between the home and an engagement are tax deductible for self-employed musicians, as long as there is a home office that qualifies as the principal place of business.

Related Websites

CRA Interpretation Bulletin IT-521R
Motor Vehicle Expenses Claimed by Self-Employed Individuals

CRA IT525R (Consolidated)
Performing Artists


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