PUBLISHED APR 19, 2021 • 9 MIN READ
Depending on your situation, there can be different requirements, legal or otherwise, for record-keeping when it comes to your car expenses.
Your employer might specify which records they want, and the CRA also has rules that apply if you are claiming a tax deduction on your work-related car expenses.
In this article, we will look at how your mileage logging requirements change based on which reporting method you use.
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:
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:
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.
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.
The requirements for what you need to record are the same as for the full logbook method.
To claim a deduction or reimbursement using the automobile allowance rate, you simply need to record all kilometres driven for business.
Once again, for any trip logged as business-related, you’ll need to note the following:
Number of kilometres driven
Although you don’t need to provide written evidence, you do need to show that you drove the kilometres being claimed. Common ways of showing this are through an automatic logbook application, or by providing diary records of work-related driving.
Paper, diary, account book, digital spreadsheets, CSV files, PDF files, and XLSX (Microsoft Excel) are all accepted by the CRA. In other words, the format does not matter as long as the right records are present.
Your employer should inform you which records they need, which includes the formats that they can process.
Paper logbooks are available from many newsagents, and are suitable so long as you remember to fill them in at the start and end of each trip.
Should you prefer an automatic solution, an automated mileage logbook app can help you to record everything you need to claim your work-related car expenses from the CRA or your employer.
No. There's nothing in the law requiring you to log odometer readings for each trip. When you use the logbook method of calculating your car expenses, you must record your odometer at the beginning and end of the period that the logbook covers - for example, at the beginning and end of the year.
However, do keep in mind that your employer might ask you to record odometer readings more frequently.
There are no requirements for exactly how you calculate your mileage as such, except that you have to record the mileage of each trip. That means either
The easiest way is probably to use a mileage app. There's a whole range of apps that are designed to solve the exact problem of tracking and recording your mileage, of which we're one. We provide mobile apps for users of iOS and Android and for both self-employed and employees.
If you drive the vehicle(s) for personal use as well, you also need to be able to show the portion of use that is for business. You work this out as a percentage of kilometres driven for both business and personal use. That means keeping a log of all trips and then calculating the share used for business.
Whether you are an individual taxpayer or self-employed, the CRA requires you to keep your records for six years from when you lodge your tax return, in case they need you to substantiate your claims.
If you use the simplified logbook method, you need to retain the “base year” logbook for six years from the end of the most recent tax year that it was used as a base year. For example, if your base year was recorded in 2018, and you used it to establish business use in 2020, you must keep the record of the base year logbook until at least 2026.
As an employee, you might be asked to prove your expenses (which could include mileage for various reasons) later on. This can happen due to no fault of yours, so it is generally a good idea to keep copies.
Using a digital mileage log and tracker makes it more likely that you will have adequate records available if needed.
If you get audited, the CRA can ask for mileage logs, which are accepted in any of the formats mentioned above. They can also ask for proof of your expenses in the form of tax invoices or receipts.
To speed up the process and avoid errors, you can order your mileage logs and records by year while maintaining a minimum of six years’ data as per the CRA requirements.
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.