Whether you are a self-employed or salaried worker in Canada, using your personal vehicles for work means that any car-related expenses incurred when conducting business are tax-deductible. The CRA allows you to claim these deductions if you have accurate records that show how you used your personal vehicle for business purposes.
Today, we will explain the CRA’s regulations for both self-employed and salaried workers in detail, as well as how TripLog’s mileage/kilometer tracking solutions can help you save thousands every tax season.
CRA Rules: Mileage/Kilometer Tracking For Self-Employed
Self-employed individuals can find the general guidelines for motor vehicle expense deductions in Canada here. It’s worth noting that business-related travel expenses are only deductible if the vehicle is used for both personal and business purposes.
Below is a synopsis of all the deductible vehicle expenses that you should monitor and record in order to be eligible for deductions come tax time.
Total Operating Expenses
Individuals can claim any expenses incurred for operating their vehicles for business purposes to the CRA. These expenses can include fuel costs, maintenance, repairs, licenses, insurance, and certain leasing costs (additional details here).
As stated above, you will need accurate records to prove that you incurred these costs when conducting business using your personal vehicle. Using pen-and-paper mileage logs can be time-consuming and inaccurate, costing you thousands. Try TripLog free for 15 days and see your savings immediately with our intuitive in-app expense reports!
Capital Cost Allowance
Capital cost allowance (CCA) refers to either the fair market value or the cost of the vehicle used for business purposes; whichever is lower if it’s a passenger vehicle that fits no more than eight passengers, including the driver, and is valued under $20,000.
For any passenger vehicle costing more than $20,00 and/or motor vehicles such as vans and pickup trucks, you can find the details here.
You can deduct up to $250 every 30 days on any interest you pay on loans used to buy your vehicle.
Personal vs. Business Segment
As mentioned above, the portion of your total expenses, capital cost, and interest that you can claim will be the proportion of the total kilometers driven for business vs. personal use of the passenger vehicle.
For example, let’s say you accrued $8000 in business expenses when using your personal vehicle, and you drove for 32,000 kilometers, with 24,000 representing business use. Using the below equation, we find that the deductible amount of $6,000.
(24,000 ÷ 32,000) × $8,000 = $6,000
CRA Rules: Mileage/Kilometer Tracking For Salaried Workers
Salaried Employee’s Allowable Motor Vehicle Expenses
As a salaried employee, you may be able to claim certain employment expenses on your income taxes and receive a return if you had to pay for those expenses under the contract of your employment. This employment contract does not have to be in writing, but you and your employer must agree to the terms and understand what is expected.
The types of deductible and allowable expenses are very similar to those for self-employed individuals. As previously mentioned, a portion of your total expenses incurred when conducting business using your personal vehicle that you may claim will be proportional to the total kilometers driven for business vs. personal use of the passenger vehicle.
Company Reimbursement Using AAR (Automobile Allowance Rate)
As a salaried individual, your employer may reimburse you for any expenses incurred when using your personal car for work. When you do get your reimbursements, make sure they are included in your employment contract and follow the CRA automobile allowance (AKA mileage) rates for 2023.
What Is the 2023 CRA Automobile Allowance (Mileage) Rate?
From the CRA’s official website, the 2023 automobile allowance rates are:
- $0.68 per kilometer for the first 5,000 kilometers driven
- $0.62 per kilometer driven after that
Keep in mind, if you’re driving in the Northwest Territories, Yukon, and Nunavut, there is an additional $0.04 per kilometer allowed for travel.
Do You Need a CRA-compliant Mileage/Kilometer Log?
Whether you’re self-employed or an employee, no matter what deductibles you’re eligible to claim back, you are required to keep and provide factual support to prove that the kilometers you listed were driven for business reasons. The CRA requires you to document your business kilometers in detail to qualify for motor vehicle deductions.
According to the CRA website, the best way to support the use of a vehicle is an accurate digital logbook of business travel maintained for the entire year showing each business trip, the destination, the reason for the trip, and the distance covered.
As mentioned above, to make a claim, you must keep a log containing both the total kilometers driven and the kilometers driven solely for business purposes. In addition, the deductible expenses must be reasonable and backed by receipts.
Furthermore, you must record the dates of the changes and the odometer readings for the corresponding transactions for any motor vehicle changes.
Manual Mileage/Kilometer Tracking
Although a pen-and-paper CRA log is a good way to keep all your records straight for the year, it can become a very tedious and time-consuming process that can bog you down. This is especially so if you’re a busy self-employed individual or a large company tracking your employee’s business kilometers. Manual kilometer tracking and monitoring through logbooks can get tiresome, be prone to errors, and is simply not scalable.
Related: How To Prevent Fraud In Business
Automatic Mileage/Kilometer Tracking
Automatic mileage/kilometer tracking is very popular thanks to recent advancements in technology, and the benefits over manual tracking are numerous. Most automated tracking solutions are smartphone apps like TripLog, often with cloud backup and web dashboard access.
Here are some of the top reasons to use an automatic mileage tracker instead of outdated manual methods:
Automatic Mileage/Kilometer Tracking App Benefits For Self-employed & Enterprise-scale Companies
Accuracy & CRA Compliance
Bluetooth tracking, iBeacons, GPS, and other technologies have enabled fast and accurate tracking that a manual log cannot beat. Humans are prone to errors in tracking logs using logbooks and hoarding expense receipts, especially for small business owners, freelancers, and gig economy leaders.
Savings: Time & Money
Smartphone apps can get you so much more savings, whether through money or time. Simplified and automatic tracking saves you time, and accurate and complete CRA-compliant records of all your business kilometers ensure you maximize your tax deductions and savings.
In addition, some advanced mileage/kilometer tracking apps have integrations with accounting software that can save you even more time. No need to keep separate records for your car and your accounting software.
These integrations save time and money, as well as provide better communication between you and your accountant. TripLog, for instance, integrates with
Mileage Tracking App Benefits Just For Enterprise-scale Companies
Transparency – Inflated Employee Estimates
Many smartphone mileage/kilometer tracking apps have enterprise solutions for mileage reimbursement purposes. These apps take the guesswork and verification process out and bring more transparency to the process through automatic tracking technologies and map-verified locations. This saves the company from potential fraud, leading to more savings in terms of time and money.
Schedule and Time Management
Dispatching a team on the road and scheduling pickup/deliveries for many businesses can be a logistical and scheduling nightmare. But automated tracking with smartphones and monitoring on the web can save the day and vastly improve the schedule and time management capabilities of small to medium organizations.
How Can TripLog Help?
TripLog is a smartphone app with a powerful web dashboard designed to provide company mileage tracking to businesses and their mobile employees. Our solution offers CRA-compliant tax deductions, travel and expense management, and replaces time-consuming manual solutions.
Whether you are a self-employed or a salaried individual, and whether you do it manually or by using an automated system, keeping track of all your kilometers is a must if you want to claim back some of your business-related expenses from the CRA. Get started with TripLog today with a complimentary web demo, or visit our pricing page to learn more!