Do you use your vehicle for both business and personal?
When a vehicle is uses for both business and personal purposes only those expenses related to business are considered an eligible business deduction. The distance driven is used to prorate the business portion of the expenses. To support the claim for expenses as well as input tax credits (itcs) a person must be able to demonstrate the distance travelled for business. The easiest way to do this is to keep a mileage logbook. The logbook should show the date, destination, reason for the trip, and the distance covered.
After keeping a mileage log for a full year (base year), the CRA allows a person to keep a log for a sample period of 3 consecutive months in following years provided it stays within 10% of the base year. You would then be able to use the base year and sample period to calculate the percentage of business related vehicle expenses that can be claimed.
Keeping a logbook is important because if documents are requested by Canada Revenue Agency (CRA) and the business travel cannot be supported, the expenses claimed and itcs for the vehicle will be denied. This can result in having to owe money to CRA plus any additional penalties and interest that may apply. Having a mileage log will assist you in gettinga tax refund.
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