Business Vehicle Use - December 2005
Business Use of Vehicle for Self-Employed Individuals
For motor vehicle expenses to be deductible for business use, a record should be kept of total distance traveled and distance traveled for business purposes in the year. The record should provide at least the date, destination, and distance traveled for each business trip.
Travel between a taxpayer's home and place of business cannot be included as business miles.
Although Canada Revenue Agency (CRA) may allow a claim for business use of vehicle in instances where a log has not been maintained, it will be difficult to prove actual business miles, and may result in a reduction of the claim.
Operating expenses include gas and oil, repairs and maintenance, and insurance. The total amount spent during the period the vehicle is used for business in prorated by the business kilometers over total kilometers. Repairs to the vehicle resulting from an accident are fully deductible if the vehicle was being used for business when the accident occurred, and are not deductible at all if the vehicle was being used personally.
Leasing, interest, and capital cost allowance are also deductible on the same pro rate basis as other operating expenses with certain limitations as set out by CRA and adjusted annually.
CRA will not accept a claim for motor vehicle expenses calculated on a cents-per-kilometer basis.
Taxpayers who are registered for GST must keep in mind that input tax credits for vehicle expenses should also be prorated based on business mileage.
Please contact our office to receive a complimentary mileage log and answers to any other tax questions.
Business Vehicle Use