If you use a vehicle for business, you can deduct the business portion of what it costs to run. The catch is in that phrase: the business portion. Establishing it requires a log, and a vehicle claim without one is difficult to defend.
What counts as business use
Travel between your workplace and a client, a supplier, or a second work location is business use. Driving from home to your regular place of work is personal, no matter how inconvenient that feels. If your home is your principal place of business, trips from there to see clients are business travel.
What a usable log contains
For every business trip, record:
- The date
- The destination
- The reason for the trip
- The kilometres driven
You also need the odometer reading at the start and end of the year, so the total distance is known. Business kilometres divided by total kilometres gives the percentage you apply to your vehicle costs.
The shortcut, and its condition
The CRA permits a sample-year method: keep a full and complete logbook for one base year, then in later years maintain a representative three-month sample and use it to project the full year, provided your driving pattern has not changed materially. The condition is that base year. Without a complete one on file, the shortcut is not available to you.
Which costs are eligible
Apply your business percentage to fuel, insurance, licence and registration, repairs and maintenance, and, where applicable, interest on a vehicle loan and capital cost allowance. Parking for a business purpose is generally deductible in full, since it is not a shared cost in the way the others are.
Why this one gets reviewed
Vehicle expenses are a frequent CRA review target for a simple reason: the claim rests almost entirely on the taxpayer’s own record of how the vehicle was used. A contemporaneous log, kept as you go, is persuasive. A figure estimated in April is not.
A phone app or a notebook in the glovebox both work, as long as you are consistent. If you would like your vehicle claim set up so it holds up, our bookkeeping service keeps this alongside the rest of your records, or ask us how to structure it.
A note on this article: tax rules and deadlines change. This article is general information, not advice for your specific situation - for that, talk to us.