*I am not a tax professional. This is meant to be an educational tool and NOT a recommendation. Each personal situation is different and there’s a lot of grey area in self-employed deductions. If you have questions (even just little ones) … talk to a tax expert.*
Ever since moving to the big ole city of Toronto I haven’t had a car, but it wasn’t long ago that I called the prairies home… and getting around without a car was just plain impossible.
So for all of you who are using some kind of motorized vehicle to get from place to place here’s how to deduct your business mileage.
We can do this the hard way… or… actually… just the hard way…
You need to keep a logbook.
That’s the only way.
If the CRA challenges you on mileage expenses the only way to back it up is by keeping a detailed log of all the times you used your car for business.
I can’t imagine that that’s what you wanted to hear.
How to keep a mileage logbook:
Your logbook doesn’t need to be fancy but it has to include (at minimum):
- the date
- the destination
- the distance per trip
The idea is that at the beginning of the year, you write down your odometer reading, and then log every business trip.
At the end of the year you add up those business trips and divide them by the total kms traveled.
And that’s the percentage of costs that you can deduct.
What can you deduct a percentage of?
You can deduct a part of your:
- leasing costs
What counts as a business trip?
I found it interesting to learn that transportation from your home to your office is NOT considered to be a business trip. Or at least not a tax deductible one.
In this Financial Post article on ‘how to deduct your travel expenses’ they break it down further, but they mention that the CRA has taken the position in some audits that a self-employed person can have several offices that qualify under the ‘not deductible’ label.
If your use of car is always to the same office/offices, you might want to check with your accountant.