Motor Vehicles for Businesses

When you use a motor vehicle to earn business income, you can claim:

• License and registration fees
• Fuel and oil costs
• Insurance
• Money borrowed to buy a motor vehicle 
• Maintenance and repairs
• Leasing costs
• Parking costs

Alternatively, if you also use the car for personal use, you can only deduct the business portion of the above categories. If you are using a company car for personal use, you would need to reimburse the company for the personal amount used or else it would not be accounted for as a business vehicle. Furthermore, if you have a meeting with a client, then those miles would be eligible to be claimed. If you routinely have this meeting at the same time and place, then it would be ineligible to be claimed. Similarly, if you are a contracted worker and you need to drive to the office at a set schedule, those miles would be ineligible as well. A key note to remember: You cannot expense any tickets or fines received while using the business vehicle.

If your business requires your employees to drive, you can offer your employees an allowance based on the allowable mileage rate of $0.58/km ($0.59/km – 2020) for the first 5,000km, and $0.52/km ($0.53/km – 2020) following that. This allowance can be counted as an expense where your employee would have to record it as income. If you are not an employee of the company (shareholder, etc.) this allowance would be counted as a dividend or a shareholder withdrawal.

Logbook:

Your logbooks requires: Date, destination, purpose, and number of kilometers.

You would need to record your odometer reading at the start and end of the fiscal period. However, if you change motor vehicles during the fiscal period, record the dates of the changes and the odometer reading when you buy, sell, or trade the vehicle. Even if you only use your motor vehicle for business use, you would still need to keep a logbook to track your mileage.

An easy way to keep track and update your logbook is via apps. Our business uses a monthly subscription-based app call “MileIQ”. It is intuitive and tracks your miles via GPS on your phone.

In the case that you do not have a logbook upon the CRA’s request, the CRA could revoke all the tax refunds or tax credits associated with your motor vehicle. In addition, you would need to provide all sales receipts for any expense incurred on your vehicle as the CRA no longer accepts bank statements as valid proof for this case.