How Self-Employed Canadians Should Handle Business Use of Personal Assets in 2026

When you use personal assets for your self-employed business, you can claim a portion of their cost or upkeep as a tax deduction, but only if you calculate and document the business-use percentage correctly. The CRA requires you to track how much of the asset's time, expense, or value goes to earning income versus personal use. Common examples include using a personal laptop for client work, a garage for inventory storage, or a family vehicle for business deliveries. Getting this right can save you money at tax time, but claiming too much without proper records can trigger a CRA audit. The CRA doesn't let you deduct the full cost of an asset unless it's 100% used for business. Instead, you apply a business-use percentage to the total expense or depreciation. This percentage must be reasonable and defensible if the CRA asks. Key points about business-use percentages: - You must calculate the percentage based on actual usage, not guesswork - The percentage applies to eligible expenses like depreciation, maintenance, or utilities - Changing your percentage year to year without clear reason raises red flags - You need contemporaneous records (like a usage log) to back up your claim A personal vehicle

Frequently Asked Questions

Can I claim 100% of a personal asset expense if I use it partly for business?

No. You can only claim the business-use percentage. If you use a laptop 50% for business and 50% personally, you deduct only 50% of the cost or depreciation. The CRA requires the percentage to be reasonable and supported by records.

What records do I need to prove business-use percentage?

Keep a logbook showing dates, times, and purposes of use. For vehicles, track kilometers. For workspace, measure square footage or record hours used. The CRA accepts simple records like a notebook or spreadsheet if they're detailed and contemporaneous.

What if my business-use percentage changes year to year?

Changes are acceptable if your business circumstances genuinely change. However, the CRA will scrutinize large swings. Document why the change happened (e.g., you hired employees and used less vehicle time for deliveries) and be prepared to explain it.

Can I claim depreciation on a personal vehicle used for business?

Yes, through capital cost allowance (CCA), but only on the business-use percentage. You cannot claim both depreciation and a mileage allowance; choose one method per vehicle and stick with it consistently.

What's the CRA's stance on high business-use percentages like 90% or 95%?

Very high percentages trigger CRA review, especially for family vehicles. Be honest. If you genuinely use the vehicle that heavily for business, strong logbook records will support your claim. Without records, the CRA will likely disallow most of the deduction.

Steps

1. Identify assets used for both business and personal purposes: List every item or space in your home or life that serves both functions. Common examples include vehicles, computers, desks, storage areas, and utilities. Focus on items significant enough to deduct.
2. Choose a measurement method for each asset: Decide how you'll measure business use. For vehicles, use kilometers or distance. For equipment, use hours per day or percentage of time. For space, use square footage or proportion of total area.
3. Establish a baseline by tracking usage for one month or quarter: Keep detailed records for at least 4 weeks (or 13 weeks for a more robust sample). Write down every business use, its duration or distance, and the date. Use a simple notebook, spreadsheet, or app.
4. Calculate the business-use percentage: Divide total business use by total use for the period. For example, 12,000 business kilometers divided by 40,000 total kilometers equals 30% business use. Round to the nearest 5% for simplicity.
5. Document and store supporting records: Save your logbook, receipts, invoices, and any photos showing business use. Organize them by asset type and year. The CRA can ask to see these records during an audit.
6. Apply the percentage to all eligible expenses for that asset: Multiply the business-use percentage by the total cost of fuel, maintenance, insurance, utilities, or depreciation. Claim only the business portion on your tax return.
7. Review and adjust annually: At the end of each tax year, reassess whether your business-use percentage has changed. If it has, recalculate and update your records. If it stays the same, consistency strengthens your defense against audit.