If you use your vehicle for both business and personal reasons, you can only deduct the portion of your vehicle expenses that relate to business use. The Canada Revenue Agency (CRA) requires you to calculate a business-use percentage based on the total kilometers driven for business compared to your total annual kilometers. For example, if you drive 20,000 km per year and 8,000 km are for business purposes, your business-use percentage is 40%, and you can only claim 40% of eligible vehicle expenses. This mixed-use rule is one of the most important concepts to understand when claiming vehicle deductions, and getting it right can significantly affect your tax deduction. The foundation of claiming vehicle deductions for a mixed-use car is calculating your business-use percentage accurately. You cannot estimate this figure. The CRA expects you to maintain detailed records of your driving throughout the tax year. Your business-use percentage applies to almost all vehicle expenses you claim: Fuel costs Vehicle maintenance and repairs Insurance premiums Registration and license fees Capital cost allowance (depreciation) Loan interest or lease payments For example, if your annual insurance premium is $1,500 and your business-use percentage is 60%, you can only claim $900 as a deduction.
Business use includes driving to meet clients, attend business meetings, or perform work-related tasks. Personal use includes commuting to your regular workplace, running errands, and leisure travel. Commuting is never deductible, even if you're self-employed.
You should log trips as they happen or at least weekly. Recording one week per month across different seasons throughout the year gives the CRA a clear picture of your driving patterns and is generally accepted as sufficient documentation.
Yes, but you can only deduct 50% of your eligible vehicle expenses. Apply your business-use percentage to every expense category (fuel, insurance, maintenance, depreciation, etc.) before claiming the deduction.
The CRA may disallow your entire vehicle deduction claim if you cannot support your business-use percentage with contemporaneous records. Without documentation, you cannot prove the business portion of your driving to the CRA.
Yes, traveling from your home directly to a client meeting or temporary work location is business mileage. However, driving from home to a permanent office location is considered commuting and is not deductible.