Logbook for Vehicle Expenses

bigstock-Handsome-man-in-his-new-car-38742049I regularly get questions from my business and tax clients about how they should record their vehicle expenses and the records that need to be kept.  A simplified logbook for vehicle expenses was announced in 2010 by Canada Revenue Agency (CRA).   According to the CRA, the introduction of the simplified logbook was to ease the tax compliance burden on business owners.  The logbook can be used for businesses and those that incur vehicle expenses as a requirement through employment.

The type of logbook can be one that you purchase, a spreadsheet that you create or record in software like QuickBooks. In whatever format you choose, there is specific information that must be included. The following is the information required for business and employment expense;

1)    The date of travel

2)    The destination

3)    Number of kilometers driven

4)    Purpose of the trip

Remember to record your odometer reading at the beginning of the year for each vehicle.  If you change vehicles during the fiscal period, record the date of change and the odometer reading at the time you buy, sell or trade.

What you will end up with, is a record of the total kilometers you drive and those that are driven to earn business. An example of this is – if you drove a total of 50,000 Kms in a year and 25,000 Kms were for business (number 3 above) then you potentially could expense 50% of your vehicle expenses (25,000/50,000 = 50%). If you click here, you’ll find a handy automobile worksheet you can work from.

To be eligible for the simplified logbook method, you need to keep a detailed logbook book for one year. If you kept a detailed logbook for 2011 then you will be eligible to use a simplified logbook for 2012.  The 2012 logbook is a detailed continuous 3 month period which the CRA considers a sample period.  The 2011 logbook establishes a base year and is used to help determine the percentage of allowable expenses you can use for 2012.   It does not take into consideration the actual expenses incurred. For more information regarding the calculation, please click here.

The types of expenses that you will want to collect and include are:

  • Gas/Fuel
  • Insurance
  • Repairs & Maintenance
  • License & Fees
  • Interest on money borrowed to purchase the vehicle
  • Leasing costs and
  • Capital cost allowance (depreciation).

Records and supporting documents are required to be kept for a period of 6 years from the end of the tax year to which they relate.  But, the full year, or 12 month logbook, must be kept for a period of six years from the end of the tax year for which it was last used to establish business use.

If you have any questions, please post them right here on the blog! I love getting feedback. And, here on this blog, you’ll get commentluv. This is a great opportunity to leave a link back to your own blog when you leave a comment.

Until next time,

Maureen

 

 

5 replies
  1. russell neufeld
    russell neufeld says:

    Hi there i have a high rate of business on my truck say 95% can i just keep track of my personal kms. in a log book and subtract those from the yearly total kms. to get my business kms. for the year. Its just that way there is way way less to keep track of because just about all my trips are business on the truck. thanks Russ

    Reply
    • Maureen
      Maureen says:

      Hi Russ.

      Even though that would be the easier way of determining your business kilometres it would not be acceptable to CRA. They want to know when, where, why and how many kilometres were used for business. Now with so many manual and electronic formats to record what the CRA requests hopefully you’ll find one that works best for you.

      Regards, Maureen.

      Maureen

      Reply
  2. Vicki Gagan
    Vicki Gagan says:

    Hi Maureen,
    I have just worked the past year as a contractor and am considered self employed. I just found out I can use my gas expenses/maintenance costs for income tax purposes. I did not record the odometer reading at the beginning of the year for 2012 &/ or 2013. If I document/calculate the number of kilometers used during each business trip then total them for the year, would this be sufficient. Thanks.
    Vicki

    Reply
    • Maureen
      Maureen says:

      Hi Vicki

      If you know or can calculate the actual number of kilometers (km) you drove for business while self-employed I would suggest you use the prescribed rate for Ontario allowed by the CRA. What this means is that you wouldn’t use any of your gas/insurance/repairs and maintenance expenses etc. for your vehicle but base it in on a rate per km driven. For 2012 the prescribed rate is $0.53 per km for the first 5,000 km and any additional kilometers would be at the rate of $0.47. Here’s an example of the calculation using 8,500 km driven for business use;
      5,000 km at $0.53/km = $2,650.00
      3,500 km at $0.47/km = 1,645.00
      Total 8,500 vehicle expense $4,295.00

      Hope that works for you, Maureen.

      Reply
  3. linda Prin
    linda Prin says:

    This is so convenient that you offer a log book worksheet! My father does a lot of travel and I really think that him using his smartphone (Quickbooks) would work best, but having a hard copy he would do better with. He is somewhat of a technology phobe so this will work great toward a greater goal. Thanks for sharing.

    Reply

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