How To Keep a CRA Compliant Mileage Logbook - Our Tips
Are you keeping a mileage logbook if you're self-employed and use your vehicle for business purposes? If not, then it is something you need to consider if you want to receive mileage reimbursement.
If the Canada Revenue Agency (CRA) audits you and you don't have a logbook, the CRA may reject your claims for motor vehicle expenses. By following our mileage log guide and tips you can make sure that the CRA has no reason not to reimburse you the amount you are entitled to. The CRA states that keeping a logbook is the best way to ensure that you have the proof in case of an audit.
What is a mileage logbook?
A mileage log, also referred to as a logbook, is a record of the trips you take with your vehicle. If you use the same vehicle for business and private purposes, then your log needs to contain a record of both. The reason you need to log both is that you need to be able to prove that you traveled the amount you claim for business purposes only.
In your logbook, every entry should include the date, reason for the trip, destination, and distance traveled. You should also keep track of your odometer readings at the start and end of the year. You can check out our free CRA mileage log template to see an example, or download the Driversnote app and test it out yourself.
Depending on your circumstances, there may be some differences in how you keep a logbook. There are two different methods of keeping a mileage log in Canada. Read on to find out which method is right for you.
The logbook method
By using the logbook method, you are supposed to record all of your driving in a mileage log to support your reimbursement claims.
If you use the full logbook method, you must keep track of your total kilometres driven as well as any business-related drives. That means you need to track every kilometre driven and categorize it as a personal or business trip.
According to the CRA, you can deduct expenses only if they are reasonable and if you have the receipts to support them. To prove you drove the kilometres you are claiming, you need to consistently log the following:
- Date of trip
- Number of kilometres you drive
- Odometer reading for each vehicle at the start and end of the fiscal period
- Change of vehicle
Recording this should become like a habit for you if you want to make sure you have everything you need for the CRA. By using a logbook app most of this is logged automatically which can save you a lot of time.
The simplified logbook method
The simplified logbook method is about establishing a “base year”. What that means is that you need to keep a logbook for 12 months and based on that you can use a three-month sample from the current year to forecast your business usage for the entire year. What you need to record is the same as it is for the full logbook method.
The CRA provides the following formula for using the simplified logbook method:
(Sample year period % ÷ Base year period %) × Base year annual % = Calculated annual business use
What other records do I need besides a mileage logbook?
To get all deductions you are entitled to, you need to keep receipts of any expense you wish to have reimbursed. You need to keep the receipts for all repairs, maintenance expenses, tolls, and anything else that may classify as a reasonable expense. Some expenses classified as reasonable are:
- License and registration fees
- Loan interest
- Lease costs
- Maintenance and repairs
How long do I need to keep my mileage logbook for?
We recommend you keep your logbooks for 6 years after submitting your tax returns. This is the same whether you are self-employed or an employee.
If you use the simplified logbook method, you must keep the "base year" logbook for six years, beginning with the end of the most recent tax year in which it was used as a base year. For example, if you recorded your base year in 2018 and used it to establish business use in 2020, you must keep the base year logbook record until at least 2026.
A few extra tips for keeping a logbook
- Don’t skip a day - if you want to be sure that all your logs are accurate we recommend you check every day if you have logged your trips properly (if not possible, make sure to do it at least once a week).
- Save time by using a logbook app instead of an Excel sheet or a physical log book.
- Don’t hesitate to ask! If there is something you don’t understand, reach out to people who know, such as accountants, bookkeepers or the CRA.
- Back up! If you are using a logbook app, that may not be necessary as your data is going to be safely stored on a cloud even if you lose your phone. Make sure to always keep a backup log somewhere if you are using an Excel sheet or keeping a physical log book.
For more information on how to keep a CRA compliant log book and all CRA requirements for 2022, you can check out our updated CRA mileage guide. You can keep a logbook whether you own a small business or are self-employed by writing down all relevant information in a paper notebook or saving it in an excel file, but it is easier to use a mileage logbook app to streamline the record-keeping process.
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