If you use your car to help you earn income, there are several types of tax deductions you can make. Tracking your work mileage can lower the amount of income tax you have to pay.
What to know about capital cost allowance (CCA)
You can deduct or claim part of the cost of depreciable property (things that wear out) you use to earn income. This deduction is called the capital cost allowance (CCA). If you own or lease a vehicle that meets CRA criteria for "passenger or motor vehicles" you can claim up to 30% of its cost.
Employer-provided cars & taxes
If you use a company car, your employer might give you a per-kilometre allowance. You need to track your mileage especially if the car is available to you for personal use. Either way, the CRA will need mileage information to determine the costs involved.
What vehicle mileage records to keep
If you're an employee, you have to report the number of kilometres you drive for work and for personal use, if any. Your employer will use those numbers to calculate whether or not your use of the car is a benefit on top of your regular salary. Quebec is particularly strict on employee record-keeping.
If personal use kilometres average less than 1,667 per month, the standby charge (a taxable amount that reflects the value of the car) can be reduced. When an employer pays an employee a reasonable per-kilometre allowance, the CRA does not collect tax on those amounts. The CRA announces its reasonable rates each December.
The CRA automobile allowance rates for 2019 are:
- 58¢ per kilometre for the first 5,000
- 52¢ per kilometre thereafter
- 4¢ extra per kilometre travelled in the Yukon, Northwest Territories, and Nunavut
Employee-owned cars
If you use your own car for work, try to get a per-kilometre allowance rather than a flat rate. The per kilometre allowance is not taxable. It's a good idea to use your car mainly for business in order to maximize your allowable deductions.
In cases where your car is used for both business and personal driving, you should keep a mileage log to support your CCA or other claims. For each trip, log the date, purpose, destination and total kilometres driven.
Self-employed car owners
Self-employed workers may not deduct per-kilometre expenses. However, you can include total kilometres as part of the overall costs. You can use a detailed mileage log for just a portion of the year to support claims, as long as it meets specific conditions:
- You have at least one full-year logbook, for comparison purposes
- Logbooks are provided for the same three-month period for each year that follows
- The business use in the subsequent books roughly matches the first
- Annual business stays roughly the same year to year
Remember to keep your records for 6 years. The CRA says that "the logbook for the full 12-month period must be kept for a period of six years from the end of the tax year for which it is last used to establish business use.”
Why you need to keep a logbook
The CRA requires you to document your business use of a vehicle if you make any claims related to it on your taxes. If you don't have a mileage logbook, and the CRA audits you, you won't be able to defend your claims.
There are many ways to track your mileage for a logbook. You could keep track manually. But, writing down every single trip may prove difficult. Worse, you could forget!
An easy-to-use app like MileIQ can help. It automatically tracks your miles for you and stores your data securely in the cloud. When tax time comes, you can create a simple report to provide all the information you need for the CRA.
