CRA Vehicle Logbook: Full Year or Three-Month Sample

What must a CRA vehicle logbook show?

A CRA vehicle logbook (a mileage log) lists each business trip with its date, destination, purpose and kilometres, and records the odometer at the start and end of the fiscal period. The CRA calls an accurate log of business travel kept for the whole year the strongest evidence of business use (CRA: motor vehicle expenses). Vehicle costs are deductible only when they are reasonable and you have receipts for them (CRA: motor vehicle records).

After one full year of logging, later years may use a three-month sample instead (see below). Without a log, the claim rests on whatever other records exist; if the CRA is already asking, see what to do when you never kept a logbook.

A claim is not simple when the vehicle is leased, jointly owned, a spouse's or a corporation's, when family also drive it, when part of the driving is between home and a regular workplace, or when earlier years were claimed without a log. Each case is covered below. Gather the odometer readings, the trip log, and the fuel, insurance, lease and repair receipts before you start.

Do I have to log every trip for the whole year?

Not every year, but the first year needs the full log. The CRA lets a business keep a full log for one complete year to set a base year of business use for a vehicle (CRA: motor vehicle records). Only after that year can a three-month sample stand in for the full log.

The CRA ties the base year to the vehicle's own normal use and asks for a separate record for each vehicle, so a vehicle bought later has no base year of its own. The base year is a 12-month period; the CRA's page does not say it must match the fiscal year.

How does the three-month sample work, and what range must it stay in?

After a base year, keep a full log for three months, then scale the base year's annual business use by how those months compare with the same months in the base year. The result is accepted when it stays within 10% of the base year's annual figure and no other evidence contradicts it (CRA: motor vehicle records).

The CRA's formula:

(business use in the sample months ÷ business use in the same months of the base year) × business use for the whole base year = calculated annual business use

1. Log every business trip for the three sample months, and the total kilometres driven in them (odometer readings at the start and end give that), so you can work out the business share.
2. Read the business share for the same three months from the base-year log.
3. Apply the formula to get the calculated annual business use.
4. Compare it with the base year's annual figure. Inside the range, claim the calculated figure for the year.
5. Check that the base year still reflects how the vehicle is normally used. The CRA says the business must be able to show that.

The CRA does not define what "within" 10% means. Its own worked example, reproduced in the Example below, treats it as percentage points added to or taken from the base year's annual figure, not a tenth of that figure. The page also does not say whether the three months must be consecutive or which months to use; its example uses April to June.

When do I have to start over with a new full-year log?

The CRA suggests considering a new 12-month base year when the calculated annual use falls outside the allowed range. The base year is then not a reliable guide for that later year, and the sample supports only the three months it covers. The CRA says the rest of that year needs an actual record of travel "or alternative records" and never defines the second term, so nothing on its page promises that anything short of a log will be accepted (CRA: motor vehicle records).

The CRA also requires the business to show the base year still reflects normal use, which a new work territory or a second vehicle taking over the driving would put in doubt. Its page does not say what happens to a replacement vehicle; a new vehicle has no base year of its own.

How do business kilometres turn into the deduction for gas, insurance, repairs, leasing, interest and CCA?

The business share is business kilometres ÷ total kilometres, applied to the year's vehicle costs. Capital cost allowance (CCA) is split the same way (CRA: personal use of property). A self-employed person works from actual costs and this share; per-kilometre allowance rates are in buying a car through your business.

The costs are on the CRA's list of deductible vehicle expenses. The caps come from section 67.2, section 67.3 and regulation 7307, and the current amounts are in the Finance release. The CRA's own example takes the interest cap first and the business share after. On the T2125, Chart A asks for your business kilometres and total kilometres, and its total goes on line 9281 in Part 4; CCA goes on line 9936 in Part 4 (Form T2125; Guide T4002).

A passenger vehicle's capital cost is also capped for CCA; the ceiling and how CCA works on a car are in capital cost allowance, and an electric car has its own limit in writing off an electric vehicle. The caps apply to a passenger vehicle, generally one seating a driver and no more than eight passengers (CRA: type of vehicle). Whether a van or pickup is one depends on how much of its use carried goods, equipment or passengers to earn income. Your log is what shows that; the tests are in buying a car through your business.

If you are registered for GST/HST, the tax on vehicle costs is a separate claim; see filing GST/HST and input tax credits.

Do I need gas receipts as well as a mileage log?

Yes, both. The log shows the business share; receipts show what the vehicle cost. The CRA allows vehicle costs only when they are reasonable and supported by receipts (CRA: motor vehicle expenses). A sample log fixes the percentage, but the costs it is applied to still need receipts for the whole year. For what a receipt must show, see CRA receipt requirements.

Is writing off the whole vehicle as business a red flag?

The CRA's vehicle pages name no business-use percentage as a red flag. A claim that every kilometre is business use is allowed only if the records show every kilometre was driven to earn business income.

The tax rules put the burden on the claim, not on a percentage. A business expense must be made or incurred to earn income, and personal or living expenses are not deductible (section 18). Only the reasonable part of an outlay counts (section 67). The CRA accepts a sample result unless other evidence contradicts it, so contradicting evidence is what matters.

Test the claim against the odometer. The kilometres in the trip log must add up to the odometer's total for the period. Any gap is personal driving, such as errands, weekends or family use, or business driving missing from the log. An all-business claim leaves no gap, so every kilometre must be in the log.

A gap can also come from the drive between home and a regular place of business. The CRA's self-employed vehicle pages speak to home travel only for farmers and fishers: the farm-to-home drive is not business travel if you did not live on the farm, and driving to the fishing boat counts if home is your main place of business (CRA: motor vehicle expenses). For an employee's company car, the CRA generally treats travel between home and a regular workplace as personal (CRA: automobile provided by the employer). Both point the same way: the drive from home to a separate regular workplace is generally personal, and counts only when home is your main place of business. Log it separately and have it reviewed before you include it as business; see buying a car through your business.

The CRA publishes no list of audit triggers. It says its risk-assessment systems flag returns at high risk of non-compliance, and an officer then decides whether an audit is needed (CRA: business audits); see what triggers a CRA audit.

What if I don't own the car: leased, jointly owned, a spouse's or borrowed?

A leased or jointly owned vehicle has rules on the CRA's pages. A spouse's or a borrowed vehicle does not.

For the last row, the Income Tax Act allows a deduction only for an outlay the taxpayer made or incurred to earn business income. It allows capital cost allowance on the taxpayer's own capital cost and interest on the taxpayer's own legal obligation to pay it (section 20), so those two follow the person who owns the car and the person who borrowed for it. Whether fuel or repairs you pay for someone else's car meet that test depends on the facts: who owns the car, who pays its other costs, who drives it, and how it is used. Keep the log and receipts; those facts are worth settling with a professional before you claim.

If my corporation owns the car, why does my logbook matter?

A corporation that owns a vehicle you also drive personally should keep a record of business and personal kilometres, because having the car available for personal use is generally a taxable benefit to you, and the log measures the personal kilometres and decides whether the benefit can be reduced. The CRA's employer-automobile page says an employee who has the use of an employer-owned vehicle must keep a log of trips showing business and personal kilometres and give a copy to the employer, and that the same rules may apply to a shareholder or a person related to one (CRA: automobile provided by the employer).

• The reduced standby charge needs more than 50% of the distance driven for work, among other conditions, and the log is how that is shown.
• The optional operating-cost method applies when the employee uses the car mainly for work and tells the corporation in writing, before the end of the year, that the method will be used (CRA: automobile provided by the employer). The log shows the work use.
• No record: the corporation must still be able to reasonably account for the business and personal split (CRA: automobile provided by the employer).
• If the corporation pays a kilometre allowance for your own car instead: with no record of business kilometres, the allowance or reimbursement is generally taxable (CRA: automobile allowances).

The CRA's motor vehicle records page sits under sole proprietorships and partnerships, and the CRA's pages give no separate logbook rule for a corporation's own deduction, but section 230 requires every person carrying on business to keep records that let the tax be determined. For who should own the car and how the benefit and the reduced standby charge are worked out, see buying a car through your business.

How long do I keep the logbook and receipts?

Keep trip logs, sample logs and receipts six years from the end of the last tax year they relate to, and the base-year log six years from the end of the tax year it was last used to set business use. Every later sample rests on the base year, so that log can outlast the year it was kept in by a long time.

Late filing and an open objection or Tax Court appeal change the clock: for a return not filed on time, the six years run from the day it is filed; for an open objection or appeal, the records stay until the time to appeal passes or the appeal ends. Electronic records must stay in a readable electronic format for the same period (section 230; CRA: motor vehicle records). For other records, see how long to keep business records.

Example

These examples are illustrative; all amounts are in Canadian dollars.

Ontario contractor: base year, a sample, then a miss

A contractor logs every trip in year 1. Business use by quarter is 52%, 46%, 39% and 67%. The CRA's example gives 49% for the year; that is not the simple average of the quarters (51%), so the quarters must carry different kilometres. April to June was 46%. Running costs are C$8,000 each year.

Years 1 and 2 follow the CRA's own worked example, where the range is 10 percentage points either side of 49%. In year 3 the base year no longer fits, so the other nine months need an actual record of travel or other records the CRA does not define, and the CRA suggests considering a new 12-month log.

Alberta owner-manager and the corporation's SUV

A corporation owns an SUV that its owner drives to client sites and on family weekends. No log was kept. The corporation must still be able to account for the business and personal split, and with no log it has only whatever other records exist. The question is then a taxable benefit to the owner, not only the corporation's vehicle deduction, and the reduced standby charge, which needs more than 50% business driving, is in doubt.

BC designer using her spouse's car

A self-employed designer visits clients in her spouse's car and pays for the fuel. The CRA's pages cover leased and jointly owned vehicles, not this case. She can keep a trip log, odometer readings and fuel receipts, but whether and how much she can claim depends on who owns the car, who pays its other costs and how it is used. Those facts are worth settling with a professional before she files.

Different for you?

• Your vehicle claim is large, earlier years have no log, the car is a spouse's or borrowed, or your corporation pays for a car you also drive personally: the business-use percentage you can support, whether a full base year is needed and how earlier years' claims stand are decisions to settle with the records in hand. Get bookkeeping help with the log, receipts and books.
• The CRA is asking for a log that does not exist: see what to do when you never kept a logbook and CRA reviews and audits. If the records behind a reply are weak, get bookkeeping help with them before you send it.
• Who should own the car, or your corporation pays a kilometre allowance: see buying a car through your business.
• An audit found personal use of a corporation's vehicle: see shareholder benefits found in an audit.
• You drive for a rideshare or delivery platform: see rideshare and delivery driver expenses.
• You bought the car with a loan or moved a personal car into the business: see recording a vehicle purchase and loan and capital cost allowance.
• The car is electric: see writing off an electric vehicle.
• Receipts are missing or weak: see CRA receipt requirements and expenses without receipts.
• You live in Quebec: you also file a Quebec return, and Revenu Québec sets the Quebec rules and figures. This page covers the federal rules only.