How do CRA motor vehicle expenses work?
CRA allows eligible motor vehicle expenses that you incur to earn business income. If the same vehicle is used for both business and personal driving, only the portion related to earning business income can generally be deducted.
BUSINESS-USE EXAMPLE
Turn your mileage log into a percentageYour business-use percentage can then be applied to eligible vehicle operating expenses, subject to the applicable CRA rules and limits.
What vehicle expenses may be deductible?
CRA lists expenses that may include:
- Fuel and oil
- Electricity costs for zero-emission vehicles
- Insurance
- Licence and registration fees
- Maintenance and repairs
- Eligible interest on money borrowed to buy a vehicle
- Eligible leasing costs
Capital cost allowance (CCA) is treated separately from regular operating expenses.
Business parking and insurance
CRA states that business-related parking fees and supplementary business insurance may be deductible separately from the normal business-use percentage calculation.
What records should you keep?
CRA says an accurate logbook is the best evidence to support business use of a vehicle.
For each business trip, keep:
- Date
- Destination
- Purpose of the trip
- Number of kilometres driven
You should also record the vehicle's odometer reading at the beginning and end of the fiscal period.
Where does this go on Form T2125?
Self-employed business and professional income is generally reported using Form T2125. CRA uses Chart A – Motor Vehicle Expenses to help calculate the deductible amount, with motor vehicle expenses reported separately from capital cost allowance.
What about Uber Eats or delivery driving?
If you earn delivery income as a self-employed worker, vehicle costs associated with earning that business income may form part of your motor vehicle expense calculation.
Keeping business and personal kilometres separated throughout the year makes it easier to support the business-use portion when preparing your records.