Being a delivery driver in Canada offers flexibility and the opportunity to earn income on your terms. Whether you’re delivering meals with Uber Eats, groceries with Instacart, or takeout with SkipTheDishes, it’s crucial to understand your tax obligations. Being a self-employed or an independent contractor means your tax situation is slightly different.
In this guide, we’ll explain everything you need to know about filing taxes as a delivery driver in Canada, maximizing deductions, and managing your finances.
Key Concepts for Canadian Delivery Driver Taxes
- Gross Income: This is the total amount you earn from deliveries before any expenses are deducted. The platforms usually provide you with a summary of your earnings.
- Net Income: Your profit after deducting all eligible business expenses from your gross income. This is the amount that will be subject to income tax.
- Business Expenses: As a self-employed individual, you can deduct certain expenses directly related to your delivery work. This is where you can significantly reduce your payable taxes.
1. Tax Reporting for Delivery Drivers in Canada
Knowing your tax responsibilities is essential if you deliver food or groceries in Canada using platforms like Uber Eats, DoorDash, SkipTheDishes, Instacart, or others. You’re not considered an employee; instead, you’re seen as self-employed or an independent contractor. Your money is categorized as business income, not employment income.
What You Need to Do:
- File a T1 Personal Tax Return and include a Statement of Business or Professional Activities (Form T2125).
- Report income from all platforms (Uber Eats, DoorDash, etc.) to avoid underreporting, as CRA gets reporting data directly from these companies.
Pro Tip:
Use a digital expense tracking app like Zoombooks to log income, and expenses in real-time. This will help you stay organized and ensure you never miss a tax deduction.
2. Deducting Vehicle Expenses as an Delivery Driver
If you drive your car for deliveries, you can claim vehicle expenses by opting for the actual expense method. Basically, each car-related expense (gas, repairs, insurance, depreciation, etc.) has to be kept status, and the business proportion of the expenses is then subtracted from the total amount of expenses. You calculate this part by calculating the ratio of the kilometers you used for your business to the total kilometers you drove.
What You Can Deduct in Canada as an Delivery Driver:
- Fuel: Keep receipts for every fill-up.
- Maintenance and Repairs: Oil changes, tire replacements, and inspections.
- Insurance: Only the portion used for business activities.
- Registration Fees: Claim a portion of your vehicle registration.
- Depreciation: Deduct the business portion of your car’s depreciation.
- License and Registration: The business portion of your vehicle license and registration fees.
- Cell Phone Expenses: If you use your personal cell phone for deliveries, you can deduct a reasonable portion of your phone bill.
- Data Plan: Similar to your cell phone, a portion of the cost is deductible if you use a data plan for work.
- Hot Bags/Delivery Equipment: The cost of insulated bags or other equipment used for deliveries.
- Parking and Tolls: These are fully deductible if incurred during deliveries.
How to Track Vehicle Usage:
You need a logbook to track the percentage of business use versus personal use.
What to Record in Your Logbook:
- Date of each trip.
- Starting and ending odometer readings.
- Total kilometers driven for deliveries.
- Purpose of the trip (e.g., delivery run).
Example:
If your total yearly mileage is 30,000 km, and 15,000 km is for deliveries, you can claim 50% of vehicle expenses as business expenses.
| Expense | Total Annual Cost | Business Portion (50%) |
|---|---|---|
| Fuel | $4,000 | $2,000 |
| Maintenance | $1,200 | $600 |
| Insurance | $2,500 | $1,250 |
| Depreciation | $3,000 | $1,500 |
| Total Deduction | $10,700 | $5,350 |
3. GST/HST Obligations for Delivery Drivers in Canada
If you are a food delivery driver in Canada and you gross income exceeds $30 000 in a year, then it is the right time to start planning! You are required to register for a GST/HST account and start charging GST/HST on the delivery services you provide to the customers.
How It Works:
A registrant can claim ITCs for the GST/HST paid on business-related expenses such as fuel, repairs, and insurance.
Action Steps to Handle GST/HST:
- Track Your Income Diligently: Monitor your earnings constantly. If you gained $30,000 in one calendar quarter or over four consecutive quarters, GST/HST is the one you must sign up for.
- Use Digital tools: Manual tracking can turn into a nightmare. Use the accounting software or expense tracking apps like Zoombooks to offer relief now and then by managing GST/HST functionalities. These can help you in logging the GST/HST collected from the customers and keeping track of the Input Tax Credits (ITCs) you can claim on the business purchases which are eligible.
- Register Early (Even Close to the Threshold): In most cases, it is advisable to also register for GST/HST when you are about to surpass the threshold of $30,000. This will show the CRA that you are being responsible and that the chances of future problems might be lower.
Important Tip:
Register early to avoid any penalties or interest for late remittances. If quarterly remittances are becoming overwhelming, consider talking with a tax professional about the remittances you are supposed to be making. They can walk you through the process and will let you know whether you’re doing things correctly or not.
4. Managing Income Fluctuations as a Delivery Driver
Drivers who deliver do acquire freedom, at the same time, there is one issue that comes out of their unique situation which fluctuating income is the one. Sometimes one week you are very busy with orders and the next week, it might be quite slow. This can make budgeting and financial planning difficult due to the fluctuating nature of income.
Tips for Staying Financially Stable:
- Track Your Income and Expenses: It is important to keep a record of your income and expenses during the year so that you can have an overview of your annual income pattern.
- Calculate Average Monthly Income: Use your income data to calculate your average monthly earnings. This will give you a baseline for your budget.
- Diversify Your Income Streams: Never see all the sources of your income as one which is not a wise decision. The employment of different platforms of delivery can help you have a more stable income. If one platform is slow, you can rely on others to maintain a more consistent income flow.
- Set Aside for Taxes: This is most IMPORTANT! Unlike the other employed working class, self-employment requires you as part of the taxes that need to be paid to register a business and you are also responsible for paying income tax and potentially self-employment taxes (CPP contributions) based on your net income. So, compared to the others, the percentage you decide to set aside should be higher (25-30% is a good starting point).
5. Insurance Essentials for Delivery Drivers in Canada
Being a driver delivering food and groceries in Canada, you may not be insured by your personal auto insurance in case of an accident, because it usually doesn’t cover business-related activities. Thus, the best solution is to have commercial auto insurance. The majority of the provinces in the country view this as not only a recommended option but the essential one due to the fact that it is a law that is required by the provinces.
Recommended Insurance Coverage:
- Commercial Auto Insurance: This kind of insurance specifically deals with this scenario in which your car is used for business purposes such as delivery. To be precise, personal car insurance is not the cover, which does not work if you are using a car for your daily business.
- Liability Insurance: Accidents are something that can’t be avoided, so if you ever be the one to cause it, liability insurance can help protect you by paying for the costs of property damage or bodily injury. However, this insurance only works if you’re able to provide proof of its existence.
- Personal Injury Protection: Liability insurance is a necessity, but personal injury protection is designed to make sure you are compensated for any damage up to the limits of your insurance. It can be used with medical bills and any other costs you may accrue in the recovery phase, thus giving you a peace of mind while driving.
Conclusion
Being a self employed delivery driver means taking care of a lot, but you don’t have to do it alone when it comes to managing your taxes. Being organized, tracking your expenses and understanding your tax obligations in Canada will give you the confidence to navigate tax season easily. Ensure you’re claiming all the deductions you deserve and giving yourself a stress-free tax filing experience in 2025.
If you have further questions or need personalized advice, consider consulting Instaccountant as we specializes in gig economy workers.
