April 19, 2021

How to calculate your mileage reimbursement

PUBLISHED APR 19, 2021 • 11 MIN READ

As we show you the simple calculations that will help you work out your mileage reimbursement, know that we are using the current CRA automobile allowance rates. For more information on the 2021 cents automobile allowance rates, see here.

If you're an employee, your employer might use a different rate than the one we use here. They may also have different rules for mileage reimbursement. If you haven’t already, take a look at our guide for employees here.

How do I use the automobile allowance rates to calculate my mileage reimbursement?

Let’s look at the following two examples:

Assume for both examples that you drive your personal vehicle for business, and your company uses the CRA’s automobile allowance rates to figure out how much you should be reimbursed.

Example 1: You have kept records for the past month, and they show that you've driven 175km for business. The standard mileage rate is 59 cents per kilometre. To find your reimbursement, you multiply the number of kilometres by the rate:

[km] * [rate], or 175 km * $0.59 = $103.25.

Example 2: You have recorded your mileage for the year to date, and they show that you’ve driven 5,700km for business. The standard mileage rate is 59 cents per kilometre for the first 5,000km, then 53 cents for each additional kilometre. The formula is as follows:

[5000 km] * [rate 1] + [Additional km] * [rate 2], or:

5000 * $0.59 = $2,950, plus

700 * $0.53 = $371, for a total reimbursement of $3,321.

What about recording my expenses in a logbook?

You can deduct reasonable motor vehicle expenses when you have receipts to support them. These can include licence & registration fees, fuel and oil costs (or electricity costs for zero-emission vehicles), as well as your insurance costs, interest on a car loan, maintenance, repairs, and/or leasing costs. To calculate your reimbursement using a logbook, first you will need to decide which logbook method to use:

  • The full logbook method
  • The simplified logbook method

The full logbook method

Recording all of your driving in a mileage logbook is, according to the CRA, the best evidence to support claiming a deduction for your business travel. 

Using the full logbook method, you must keep a record of your total kilometres driven, as well as every business-related drive. In other words, recording each and every kilometre driven with a breakdown of personal or business driving. 

For any trip logged as business-related, you’ll need to note the following:

  • Date
  • Destination
  • Purpose; and
  • Number of kilometres driven

In addition, you’ll need to report on the odometer reading at the start and end of the year (or fiscal period). Alternatively, if you change vehicles during the year, you’ll need to record the dates that you changed vehicle as well as the odometer reading when the change was made.

According to the CRA, you can only deduct motor vehicle expenses when they are reasonable, and when you have receipts to support them. Deductible expenses include:

  • Licence & registration costs
  • Fuel & oil
  • Electricity (for zero-emission vehicles)
  • Insurance
  • Maintenance & repairs
  • Leasing costs
  • Interest on money borrowed to buy the motor vehicle

Finally - if you use more than one vehicle for business purposes, remember to record the kilometres for both vehicles separately, as well as recording your expenses for each vehicle. Basically, you must calculate your deduction for each vehicle separately.

Now, let’s look at a new example:

This time, we're assuming that you drive your personal vehicle for business, and are using a logbook to figure out how much you should receive as a deduction.

Example: In the first 3 months of the new fiscal period, you have recorded a total of 12,000km - 8,000km of which have been business-related - and you have incurred reasonable expenses of $4,000. To calculate your deduction, you need to multiply your expenses by your business use percentage:

( [business km] / [total km] ) * [expenses], or:

( [8,000 km] / [12,000 km] ) * $4,000 = 0.75 * $4,000, for a total deduction of $3,000.

The simplified logbook method

Once you have a full 12 months of driving (both business and personal) recorded in a logbook, you can use that to establish a “base year” for your business usage. 

When the base year is established, you can then use a three-month sample from the current year to forecast your business usage for the entire year. 

There are some limitations here - the calculated business use for the sample period must be within 10% of the business use in the base year. If the business usage in the sample period is different from the base year by more than 10%, the sample period logbook will only be reliable for the 3 months of driving you recorded, and you will need to determine business usage for the remainder of the year by logging all of your driving once more.

The formula that the CRA requires to calculate your annual business use using the simplified logbook method is:

(Sample year period % ÷ Base year period %) × Base year annual % = Calculated annual business use
 
Example 1:

Jenny has completed a logbook for all of 2020, which showed her business use percentage in each quarter as 48% / 53% / 61% / 35%, with a calculated annual business use of 49%. In January to March of 2021, she maintained a sample logbook showing that her business use was 57%. For the same period of the base year, her business use was 48%. The calculated annual business use is worked out as follows:

(Sample year period % ÷ Base year period %) × Base year annual % = Calculated annual business use

(57 % ÷ 48 %) × 49 % = 58%

In this instance, her sample logbook would be accepted for the year, with a calculated annual business use of 58% - as this is within 10% of the base year’s business use of 49%.

Example 2:

Steve has completed a logbook for 2019 which showed his business use percentage in each quarter as 34% / 35% / 36% / 35%, with a calculated annual business use of 35%. In 2020, his usage was consistent with 2019 percentages, however in January to March of 2021, his business requirements increased and the business usage percentage increased to 60%.  In comparing this to January to March of 2019, where the business use was 34%, the calculated annual business use is worked out as follows:

(Sample year period % ÷ Base year period %) × Base year annual % = Calculated annual business use

(60 % ÷ 34 %) × 35 % = 62%

As you can see above, Steve’s calculated business use is more than 10% above the annual business use in his base there. Therefore, his base year record will no longer be suitable, and he should consider establishing a new base year by maintaining his logbook for a new 12 month period. 

How does this help me calculate my reimbursement?

To calculate your reimbursement using either logbook method, you need to know the business use percentage of your car expenses. Let’s look at a simple example:

At the end of the financial year, your logbook shows a record of 35,000 total kilometres. Of the 35,000 kilometres, 80% were for business purposes.

After adding up all of your expenses for the year from the receipts and invoices you’ve kept, your total expenses are $10,000 for the financial year. To calculate your mileage reimbursement, you just need to complete the following calculation:

[Expenses] x [Business Use %] = [Deduction]

$10,000 x 80% = $8,000

Once again, you are able to claim your deduction or reimbursement for more than one car. Simply maintain a separate logbook for each vehicle. If you are using a paper logbook, you can keep one per car. Some apps like Driversnote allow you to select the car that you are driving before tracking your trip.
 

Further examples

For more information, we suggest you continue reading our guides, as they provide specific information that may help you based on your own set of circumstances. 

 

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This material has been prepared for general informational purposes only, and should not be taken as professional advice from Driversnote. You should consider seeking independent legal, taxation, or financial advice from a professional to check how this information relates to your own circumstances. Relevant laws also change from time to time.