If you have used your vehicle to earn business income over the past year then you can claim the related expenses on your income tax. However, you must be able to verify your claim with evidence in the form of a mileage log book which is maintained for the entire year.
You need to record the following information in the log book each time you use your vehicle for business purposes:
- The date
- The starting point
- The destination
- The purpose of your trip
- The vehicle starting mileage
- The vehicle ending mileage
- The total kilometers driven
Mileage log books are available at office supply stores or it is easy to make one up yourself. Alternatively, there are apps available for Apple and Android smartphones such as:
- MileIQ (IOS and Android)
- Mileage Expense Log (IOS only)
- TripLog (IOS and Android)
- QuickBooks (mileage tracking is included with QuickBooks Self-Employed)
Business Use vs Personal Use
Claiming excessive use of your personal vehicle for business purposes is a sure way to attract extra scrutiny and possibly an audit from the CRA. So, it is important that you know how many non business-related kilometers you drove in a year. The best way to calculate this is to record your odometer reading at the beginning of the year and at the end of the year, this will give you your total mileage for the year. When you deduct your recorded business mileage this will leave you with the total for personal use.
Employees who use company vehicles must also keep track of the mileage driven for business vs personal use. Mileage for personal reasons is a taxable benefit that must be included in employee income. Mileage recorded between home and place of business is considered to be commuting and is classed as personal use.
For more information about claiming business expenses related to the use of your vehicle to earn business income see What Motor Vehicle Expenses Can You Claim on Income Tax in Canada?