Self-Employed? How to Keep a Mileage Log for Vehicle Expenses in Canada
If you’re self-employed and use your car for business purposes, keeping a mileage log is important. Learn how to keep a mileage log for vehicle expenses in Canada.
A mileage log is a detailed record of your annual business travel. The Canada Revenue Authority (CRA) can deny your motor vehicle expenses claims if your numbers are questionable. Your mileage log comes in handy when the CRA wants to audit your tax records.
If you don’t have a mileage log and still want to file car expenses claims, you can only make estimates. Since you cannot substantiate the figures, you’ll probably file a lower amount than the actual expenses to minimize the chances of an audit.
Vehicle overheads in running a business can be way higher than your approximations. You can only get legitimate write-offs through accurate tracking of the costs.
Features of a mileage log
Your mileage log should bear the following details for the whole year:
- Every business-related travel
- The destination for each trip
- Purpose of every trip
- Total distance traveled in the year
To capture these details accurately, record the date of each trip, departure point and destination, starting and ending mileage, and the distance covered in kilometres.
Paper versus digital logs
Maintaining a paper mileage log is okay, but it can be tedious. You can track your business travel with less effort using a mobile app. Many versions are available on the market. They use the GPS of your mobile device to track your journey.
Save the trip as personal or business-related, depending on its purpose. At the end of the year, download and print the annual report. You can present it to the CRA on demand.
Deducting vehicle expenses
For every tax year, you’ll need the odometer reading for the first and the last day. If you happen to change vehicles in the middle, be sure to note the start and end readings for both and the swapping date.
Find the deductible amount by dividing the distance travelled for business by the total travel for the year. Multiply the answer with the total eligible car expenses for the period.
Eligible deductions include license and registration fees, fuel, insurance, maintenance and repair, lease costs, and loan interest. Keep all your receipts as proof.
To be on the safe side, keep your mileage log for vehicle expenses in Canada for at least six years. It will support your claims should the CRA select your return for audit.
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