Tracking Auto Expenses for the Tax Department

When does an individual need to keep track of their automobile expenses? Generally, a person should be keeping a detailed record of all expenses incurred and the amount of kilometers driven in a log book if they are claiming them as a business deductible. The individual must show that the expenses were incurred for the purpose of earning business income and were reasonable. Note that travelling from home to your workplace is not considered to be business related. Here are a few examples that the tax department considers to be business travel:

  • Travelling from your home to a client’s place then back home
  • Travelling from your home to a client’s place then back to work
  • Travelling from your workplace to a client’s place then home

Generally, eligible deductible automobile costs include the following: gasoline, repairs and maintenance, oil changes, car washes, insurance, licenses, registration fees, parking charges. Lease payments and interest expenses for purchased vehicles are subject to special rules. If a person uses their automobile for both personal and business use, they must allocate their total expenses between the two. The allocation is usually done on a pro-rated based on kilometers travelled. However, if an individual receives an automobile allowance from their employer that is considered to be reasonable they cannot deduct any automobile expenses. The tax department considers an allowance reasonable if it does not exceed the following:

  • 55¢/km for the first 5,000 km driven
  • 49¢/km after that

In the Northwest Territories, Yukon, and Nunavut, there is an additional 4¢/km.