Claiming Automobile Expenses

Only expenses of a business nature are eligible as a deduction against related income.  As such  CRA requires that there be a means to both substantiate  and allocate vehicle expenses  between personal and business use.  A vehicle log, detailing each business trip ( client name, address, odometer reading  at start, odometer reading at arrival, total mileage used)  is the de facto  means required for this purpose  and the one feature of business  that is most often over looked.

If you do  not currently keep a log  the best way to recreate the missing data of the year is to pull out your day timer or other appointment log and work from there  using MapQuest  to give you travel distances.  Note your current odometer reading  and the date and going forward  add in the mileage involved in each  business related trip.  At year end  note the odometer reading again.

Expenses for vehicles  fall into three categories:

  • operating expenses  which must be prorated between personal and business
  • operating expenses  which are strictly  business
  • fixed expenses  which must be prorated  between personal  and business (subject to special rules  and restrictions)

The first category  includes gas, repair,maintenance, insurance,  license and registration.  The second category  includes  parking and repairs incurred  while on a business trip. The third category  relates to your lease payments  or the depreciation  taken on owned vehicles.

As this issue is one on which CRA catch many business owners  and those claiming  deductions from employment  of  a T2200, and as it may have an impact on  the income  reported on your T4, if you pay yourself a salary,  we recommend that you speak to your Padgett Business Services representative.

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