Using a Corporate Automobile for Work and Personal Travel: Claiming Car Expenditure Deductions on Your CRA Tax Return and Maintaining a Mileage Logbook
Many self-employed individuals and regular employees use a corporate automobile for business purposes such as client meetings, financial transactions, or travel to the airport. While car expenses can be claimed as deductions on your CRA tax return, the vehicle is often used for personal use as well.
It’s important to note that taxes must be paid on this benefit, similar to regular income, for self-employed individuals, business owners, and employees who have access to corporate vehicles. Keeping an accurate mileage log of all work-related travel is essential to support your claims.
In this blog, you’ll find important information about maintaining a mileage logbook for claiming car expenditure deductions.
What a mileage logbook is?
A mileage logbook, also referred to as a log, is a comprehensive record of the trips taken in a car for both personal and business purposes. In order to claim mileage as a tax deduction, it’s essential to keep track of both types of trips and demonstrate that the distance claimed is solely for business purposes.
The logbook should include specific details for each entry, such as the date, purpose of the journey, location, and distance covered. Additionally, it’s necessary to record the odometer readings at the start and end of each year. Depending on individual circumstances, the format of the logbook may vary.
Canada Revenue Agency (CRA) Requirements for Maintaining a Mileage Logbook
When using the logbook method to support your claims for reimbursement, it’s necessary to maintain a record of all your driving in a mileage log.
To utilize the complete logbook method, you need to document the distance of both personal and business-related driving. This requires keeping a detailed record of every mile traveled and classifying it as either a personal or work journey.
According to the CRA, you can only claim costs that are reasonable and supported by receipts. The following information must be recorded in your logbook every time the vehicle is used for business purposes:
- Date
- Destination
- Purpose of the trip
- Vehicle starting mileage.
- Vehicle ending mileage.
- Total miles driven.
- Vehicle expenses such as gas, oil, tolls, etc., along with their amounts.
How Long Should You Keep Your Mileage Logbook?
It’s advisable to maintain records and supporting documents, such as receipts, for at least six years. This way, if you face an audit, you will have the necessary documentation to support your claims. Additionally, keep a copy of your entire logbook for six years after you stop using it, as well as for the period you are still using it.
For example, if you established your entire logbook in 2009 and used it to calculate your yearly driving percentage up until 2015, you must maintain a copy of it until recent years. If you use your car for work 80% of the time, you can deduct 80% of your overall vehicle expenses from your taxes.
If you have more than one car used for business purposes, you must maintain a unique logbook for each vehicle. When claiming a vehicle expenditure deduction for multiple cars, you must calculate the expenses for each vehicle separately.
To sum up,
We have covered the importance of maintaining a mileage logbook as a record of all the journeys made in your car, especially when using the same vehicle for both personal and work-related purposes. It is crucial to maintain an accurate logbook to demonstrate that the claimed distance is solely for business purposes. Additionally, we discussed that you can claim 80% of your vehicle expenses on your taxes if you use your car for work purposes 80% or more of the time. The Canada Revenue Agency (CRA) requires receipts and reasonable costs to support any claims for reimbursement.