If you are one of the thousands of Montrealers using your personal car to earn extra income, whether you’re driving for Uber, delivering for DoorDash, or visiting freelance clients, your vehicle becomes more than just transportation. It becomes a business expense.
Many gig workers already track fuel and maintenance. However, one of the most overlooked deductions is car insurance. According to the Canada Revenue Agency (CRA), self-employed individuals can deduct motor vehicle expenses used to earn business income, including insurance premiums, fuel, maintenance, licence fees, leasing costs, and loan interest. These expenses are typically reported on Form T2125, which is used to report business income and expenses.
This means that if you use your car for a side hustle in Montreal, a portion of your insurance premium may be deductible. But before claiming deductions, it is important to ensure you have the right coverage.
Many gig workers speak with an insurance broker in Montreal early in the process to confirm their policy covers commercial or gig-economy use, since personal policies often do not cover rideshare or delivery work.
Who Can Deduct Car Insurance in Montreal?
The CRA considers gig workers, freelancers, and independent contractors to be self-employed, which means you must report income and you may also deduct eligible business expenses. This includes drivers working with Uber, delivery platforms, or freelance professionals using their vehicles for business purposes.
Examples include:
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Uber and Lyft drivers
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Uber Eats, DoorDash, SkipTheDishes drivers
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Freelancers visiting clients
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Consultants and contractors
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Small business owners using personal vehicles
If your vehicle helps generate income, you may deduct a portion of your vehicle expenses, including insurance.
What Vehicle Expenses Can You Deduct?
The CRA lists several motor vehicle expenses that self-employed individuals may claim when they use their vehicle to earn income. These include:
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Insurance premiums
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Fuel and oil
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Maintenance and repairs
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Licence and registration fees
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Interest on car loans
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Leasing costs
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Capital cost allowance (vehicle depreciation)
These expenses must be reasonable and directly related to earning business income.
However, if your vehicle is used for both personal and business purposes, you cannot deduct the entire expense. You must calculate your business-use percentage.
How to Calculate Your Car Insurance Deduction
Both CRA and Revenu Québec require you to calculate how much of your vehicle use relates to business.
Revenu Québec explains that the deductible amount is based on the ratio between business kilometres and total kilometres driven during the year.
For example:
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Total kilometres driven: 20,000 km
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Business kilometres: 5,000 km
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Business use: 25%
This means you can deduct:
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25% of insurance
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25% of fuel
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25% of repairs
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25% of maintenance
The CRA also recommends maintaining a logbook that records:
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Date of trip
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Destination
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Purpose
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Distance travelled
An accurate logbook is considered the best evidence to support business use of your vehicle.
The Insurance Mistake Many Gig Workers Make
Many Montreal gig workers assume their personal auto insurance covers rideshare or delivery work. However, insurers warn that standard personal auto insurance policies usually do not cover commercial or for-profit use.
For example, Aviva notes that standard automobile insurance typically does not cover rideshare driving unless additional coverage is added to your policy.
This means:
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Claims may be denied
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Coverage gaps may exist
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Personal liability risk increases
Some rideshare platforms provide limited coverage while drivers are active, but personal coverage gaps may still exist depending on the situation.
Because of this, many gig workers consult an insurance broker before claiming deductions or starting a side hustle.
If You Work From Home, Home Insurance May Also Be Deductible
Many freelancers and gig workers operate from home, which may create additional deductions.
The CRA confirms that self-employed individuals can deduct business-use-of-home expenses, including home insurance, when part of the home is used to earn income. The deductible amount is typically calculated using the workspace area divided by the total home area.
This may apply to:
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Freelancers working from home offices
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Consultants running side businesses
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Online sellers
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Remote service providers
For example, if your home office occupies 10% of your home, you may be able to deduct 10% of eligible home expenses, including home insurance.
Reporting Your Deduction Properly
Gig workers in Canada typically report:
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Form T2125 for federal taxes
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TP-80-V for Quebec (if applicable)
Both forms allow you to report income and business expenses, including motor vehicle costs.
When filing your return, understanding available deductions can help reduce taxable income. Many taxpayers review Canadian tax credits and deductions to identify eligible expenses before filing.
It is also helpful to avoid errors when reporting expenses. Understanding common tax filing mistakes Canadians should avoid can help ensure deductions are claimed correctly and supported by documentation.
Common Mistakes Montreal Gig Workers Should Avoid
According to CRA guidance, some of the most common mistakes include:
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Not tracking mileage
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Mixing personal and business driving
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Not keeping receipts
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Claiming 100% of expenses incorrectly
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Using incorrect insurance coverage
Since the CRA requires documentation, maintaining proper records helps ensure deductions remain valid during audits.
Conclusion
If you are working a side hustle in Montreal, your vehicle is one of your largest business expenses. Understanding how to deduct car insurance and motor vehicle costs can significantly reduce your taxable income.
However, deductions must be calculated carefully. Tracking mileage, keeping receipts, and ensuring proper insurance coverage are essential steps. Many gig workers also overlook additional deductions, such as home insurance when working from home.
With proper planning and accurate reporting, you can stay compliant with CRA and Revenu Québec rules while maximizing your tax savings.
Frequently Asked Questions
Can I deduct 100% of my car insurance?
No, the CRA states that if your vehicle is used for both personal and business purposes, you can deduct only the business-use portion. You must calculate your deduction using the ratio of business kilometres to total kilometres driven during the year. Keeping a logbook helps support your claim if the CRA reviews your return.
Do Uber and delivery drivers qualify for car insurance deductions?
Yes, gig workers such as Uber drivers, delivery drivers, and freelancers are generally considered self-employed. This means they must report income and may deduct eligible expenses incurred to earn that income, including vehicle insurance and operating costs.
Do I need to keep receipts and mileage logs?
Yes, the CRA recommends keeping receipts and maintaining a mileage log that includes trip purpose, distance, and destination. These records serve as proof of business use and may be required if your claim is reviewed.
Can I deduct home insurance if I work from home?
Yes, in certain situations. If you use part of your home to earn business income, the CRA allows you to deduct a portion of expenses, including home insurance. The deductible amount is typically based on the workspace size compared to the total home area.
What happens if I use personal insurance for gig work?
Some insurers warn that personal auto insurance may not cover rideshare or delivery use. Without proper coverage, claims may be denied or partially covered. This is why many gig workers review their policy or speak with an insurance professional before starting a side hustle.