Do you deduct your mileage? Do you know all the details you need to know about logging your mileage? Most of us don’t and the government doesn’t make it easy to find the details. Therefore, instead of having to navigate aimlessly through the government’s documents… let me do the hard work for you. Below is the “need to know” about mileage deduction according to the government. There is a link at the end of this post for your own reference.

The CRA (Canadian Revenue Agency) says,

“Motor Vehicle Expenses

3. Where a “motor vehicle” is used by an individual in a taxation year partly to earn business income and partly for personal use, the deductible amount is normally that proportion of the aggregate of the

(a) total operating expenses of the vehicle incurred by the individual in the year,

(b) capital cost allowance, and

(c) interest

that the distance traveled by the vehicle to earn the business income is of the total distance traveled by the vehicle for the year. For example, where the aggregate of (a), (b) and (c) as described above for a year is $8,000 and the total distance traveled for the year is 32,000 kilometres of which 24,000 represent business use, the deductible amount is $6,000 determined as follows:

(24,000 ÷ 32,000) × $8,000 = $6,000

4. Should an individual own or lease two or more “motor vehicles” used partly for business purposes and partly for personal purposes, the above calculation may be applied separately for each vehicle or, for convenience, the calculation may be applied for both or all the vehicles taken together. That is, the operating expenses, capital cost allowance and interest (see 5, 13 to 20 and 21 below) for each “motor vehicle” may be combined and the deductible amount determined on the basis of the ratio of combined distance traveled for business purposes to combined total distance traveled, provided the result so determined is reasonable and not materially different from that where the determination is made for each vehicle.

5. The term “operating expenses” referred to in 3(a) above includes the cost of fuel, maintenance (for example, car washes, grease, oil and servicing charges), repairs (other than accident repairs-see 7 below), licenses, insurance and, except as noted in 6 below, “eligible” leasing costs (see 9 to 12 below), less the aggregate of all rebates or other amounts (except where used to calculate the “eligible” leasing cost) received or receivable by the individual for the expenses and not included in the individual’s income.

6. Where an individual, who leases a “motor vehicle” on a long-term basis but is not entitled to claim capital cost allowance on it, makes frequent use of the vehicle during normal work hours for business purposes, but the distance traveled for that purpose is comparatively low, the “eligible” leasing cost (see 9 to 12 below) for that vehicle may be excluded from the operating expenses if the individual so requests and the circumstances warrant it. The “eligible” leasing cost is then apportioned on the basis of a reasonable combination of distance traveled and time the “motor vehicle” was used for business purposes. For example, if a “motor vehicle” were used for business purposes five days out of seven in a normal work week, it might indicate that (allowing for personal use in the evening, usual holidays, time off for sickness, etc.) it was used 65% of the time for business purposes. If, on a distance-traveled basis, the vehicle were used only 25% for business purposes, combining the two factors might suggest that 45% of the “eligible” leasing cost should be attributed to business use. However, where a “motor vehicle” is used infrequently for business purposes, the apportionment must be on the distance-traveled basis alone, even though the vehicle is available at all times for business purposes.

7. Accident repair expenses, whether incurred to repair damages resulting from the accident to a “motor vehicle” driven by the individual or to the property of others, are deductible in full if the vehicle was being used for business purposes at the time of the accident. Any amount deductible is net after recoveries through insurance or damage claims. No portion of such expenses is deductible if the vehicle was being used for personal purposes at the time of the accident.

8. To be deductible, “motor vehicle” expenses must be reasonable in the circumstances and supportable by vouchers. (The vouchers need not be filed with the individual’s income tax return; however, they must be retained for examination on request.) A claim by an individual for “motor vehicle” expenses calculated on a cents-per-kilometre (mile) basis is not acceptable. To support a claim where a “motor vehicle” is used in part for business purposes and in part for personal purposes, a record should be kept of total distance traveled and distance traveled for business purposes in a year. The record should contain at least the date, destination and distance traveled for each trip.” http://www.cra-arc.gc.ca/E/pub/tp/it521r/it521r-e.html

If you needed more information please contact the Canadian Revenue Agency (CRA). Also, consult your financial advisor or accountant for your specific company processes as they may be different from what the government is offering.

 FYI: This post is part 1 of 2 that will outline exactly what the government says about deducting your mileage. Next week I will post the details for mileage deduction according to the IRS (Internal Revenue Service).

Hope this helped

-Ashton Byrne, Marketing Coordinator for Quino Solutions Inc.