Keeping a Log

Taxpayers must keep a logbook if they only have one motor vehicle and operate that same vehicle for business and personal use. This is done to separate personal usage (kms) and business usage (kms).

When taxpayers write off vehicle expenses, it is only the business usage (kms) that are deductible.

If a corporation provides an employee, shareholder, director, etc. with the use of a company car, that individual must keep a logbook to differentiate between personal, and business usage (kms). At certain times, a taxable benefit (i.e. the taxpayer will have additional income) will be charged to the employee depending upon the business use and personal use of the vehicle in question.

When creating a log, the following should be input:

  • Kilometres driven;
  • Purpose;
  • Date;
  • Original location; and
  • End destination.

 

Employees

Many employees believe that all their driving, when business related, is deductible. This is not actually the case. The Canada Revenue Agency (CRA) has stated, on many occasions, that the drive to and from your office is not deductible. There are conflicting rulings as to whether it is only the drive from home to office, or just the first drive of the day.

 

Self-Employed

For those who have a home office the above issue is not as clear-cut. There have been instances where CRA has allowed a deduction for the drive from your home office to a client’s home, even when this is the first drive of the day.

 

If you have questions about keeping a log, or the CRA has contacted you about your log, give us a call today to see how we can help!

 

CRA Resources

IT522 – Vehicle, Travel and Sales Expenses of Employees

Motor vehicle records

Documenting the use of a vehicle

Form T2125, Statement of Business or Professional Activities

 

Case Law

Ware v. The Queen, 2006 TCC 544 – Motor Vehicle Expenses Claimed

Jacobsen v. The Queen, 2012 TCC 25 – Documentation needed when Claiming Expenses

Holte v. The Queen, 2002 CanLii 1091 – Travelling Salesman

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.