Most new rideshare drivers in Toronto find out about the HST rule the hard way. It usually lands somewhere around late April. Unlike nearly every other small business in Canada, you’ve to register for a GST/HST number before your first paid trip. There’s no $30,000 threshold to grow into first. At Autorama we have spent more than 25 years helping Toronto drivers choose and finance the cars they drive for a living. The tax question comes up on our lot almost as often as the financing one. This guide covers what you owe, what you can write off, and how your running costs should shape the car you buy.
You’re Running a Business Now
Uber and Lyft do not employ you. Nothing is withheld from your weekly payouts. Every dollar that lands in your account is gross business income, and the income tax, the CPP contributions, and the HST all come out of it afterwards. You report the year on form T2125, the Statement of Business or Professional Activities. Which gets filed along with your regular T1 return. Self-employed people also pay both halves of CPP, the employee share and the employer share. That catches drivers who are used to seeing one small deduction on a pay stub.
The HST Rule That Catches New Drivers
Register before you take your first rider. Since 2017 the CRA has treated ride-sharing the same way it treats a taxi business, which means the small supplier threshold that protects other new businesses doesn’t apply to you. You need a Business Number and a GST/HST account. Both can be set up through Business Registration Online in well under an hour. Ontario’s rate is 13%, and Uber collects it on the fare and passes it through to you, so that money is sitting in your payouts already earmarked for the CRA.
The HST you pay out on business purchases comes back to you as input tax credits. That covers the tax on your fuel, your repairs, your car washes, and the service fee Uber charges you on every single trip. Your annual tax summary from Uber breaks those figures out, and it’s the most useful document you’ll receive all year. Ask an accountant about the Quick Method as well, because the remittance rate under it sits below 13% and you keep the difference.
Uber Eats and delivery work
Courier work is treated differently from driving passengers. Delivery is not a taxi business under the Excise Tax Act, so the ordinary $30,000 small supplier threshold does apply to that portion of what you earn. If you run both, keep the two revenue streams separate in your bookkeeping from day one, since only the rideshare side forces you to register. Once you’re registered, that registration covers your whole business, so get advice on how the delivery income should be handled.
What You Can Actually Deduct
Vehicle costs are the largest deduction you’ve, and they count only in proportion to your business use. Say you put 40,000 km on the car last year and 28,000 of those were online or driving to a pickup. Then 70% of your gas, insurance, repairs, oil changes, tires, and plate renewal is deductible. Driving from your house to the neighbourhood where you like to start a shift is personal mileage, not business mileage. Buying instead of leasing changes the mechanics, since you claim capital cost allowance on the vehicle rather than deducting a monthly payment.
Capital cost allowance is simply depreciation. Most passenger vehicles are written down at 30% of the declining balance each year. There’s a ceiling on how much of the purchase price you’re allowed to depreciate, and a separate monthly ceiling on the loan interest you can deduct. Both limits are set by the CRA based on the year you acquired the car. So confirm the current figures instead of assuming your whole payment qualifies. Lease payments have their own monthly cap and work the same way.
The write-offs drivers forget
- Uber’s service fee and booking fee, which are real business expenses even though the money never touches your account
- 407 ETR tolls and paid parking during a shift, though parking tickets don’t qualify
- The business-use portion of your phone bill, plus the phone itself, the mount, and the charging cables
- Car washes, interior detailing, floor mats, and seat covers
- Water, mints, and passenger chargers you keep in the car
- Bookkeeping software, accounting fees, and a roadside assistance membership
Traffic fines and speeding tickets are never deductible. Neither are the meals you buy for yourself between trips. Anything you claim needs a receipt behind it, and a photo in a dated folder on your phone is enough to satisfy the CRA.
Keeping a Logbook That Holds Up
The burden of proving your business-use percentage falls on you, not on the CRA. A pile of fuel receipts shows what you spent but says nothing about which kilometres were earning and which were personal. Write down your odometer reading on January 1 and again on December 31, then record business kilometres day by day through the year. Uber’s summary captures the kilometres you drove while online. A logbook of your own picks up everything else, including the run to the mechanic and the drive to a safety inspection.
The CRA does allow a shortcut once you’ve done the work properly. Keep a full logbook for one complete base year, and in later years you can use a representative three-month sample to project your business use, provided your driving pattern stays roughly the same.
Dates You Need on the Calendar
Your return isn’t due until June 15 as a self-employed filer, but any balance you owe is due April 30. That six-week gap is where most drivers get stung, because interest starts running on money the CRA considers late even while your paperwork is still legitimately outstanding. If your net tax owing tops $3,000 in the current year and in either of the two years before it, you’ll be moved onto quarterly instalments due March 15, June 15, September 15, and December 15. Set aside roughly 30% of every payout in a separate account. None of these dates will hurt.
Running Costs Should Decide Which Car You Buy
The cheapest car on our lot is rarely the cheapest car to drive 40,000 km a year. Fuel is the expense that compounds fastest, and the gap between a hybrid rated in the low fives per 100 km and a mid-size sedan in the nines works out to thousands of dollars over a year of full-time driving. Check the official fuel consumption ratings for any car you’re considering rather than trusting the sticker on the window. That single number will move your take-home pay more than the trim level or the sound system ever will.
Insurance is the second thing to sort out before you start. Tell your insurer you’re driving for a rideshare platform, because several Ontario insurers offer a ridesharing endorsement and undisclosed commercial use can leave a claim denied. Maintenance costs scale with the same kilometres. Expect oil changes three or four times a year, and brakes and tires far sooner than a personal car would need them. Remaining factory warranty is worth paying a little extra for when the car is going to work this hard.
Vehicle age is the constraint people miss. Toronto and the GTA cap eligible vehicles at seven model years, which is stricter than the rest of Ontario. So a six-year-old car buys you one season before you’re shopping again. Read through the uber driver requirements before you commit to anything. Every vehicle in our fleet of cars for uber already clears the age, door count, and safety standards the platform enforces.
Open a second chequing account this week, route 30% of every deposit into it, and photograph receipts as they come rather than sorting a shoebox next April. Drivers who do those three things tend to find that tax season costs them an afternoon instead of a month of stress. Maybe your current car is drinking fuel or is about to age out of the seven-year window. Come see us and we’ll work out what the payment and the running costs actually look like side by side. Our used cars toronto inventory changes weekly, and our financing approval takes minutes.
