Can I just estimate my business-use percentage?

You can, but it is risky. The book warns that auditors "jump on estimates" and that without a log they will often deny vehicle expenses. The defensible approach is to keep a contemporaneous log of business trips and odometer readings and calculate the percentage from real data.

What exactly goes in a vehicle log?

For each business trip: the date, where you went, the business purpose, and the kilometres driven. You also record your odometer reading at the start and end of the year so you can calculate total kilometres and your business-use percentage.

Which car costs can I deduct?

The business-use share of fuel, insurance, licensing, maintenance and repairs, and interest on a vehicle loan or lease costs. Personal driving is never deductible — only the business portion, set by your log.

I drive for both work and personal trips — is that a problem?

No. Dual-use vehicles are normal and accepted. What matters is that you can distinguish business from personal use, which is exactly what the log does. You then claim only the business percentage.

My employer pays me a car allowance. Can I still deduct expenses?

It depends on whether the allowance is "reasonable." A reasonable per-kilometre allowance is generally tax-free and you would not also claim the expenses. An unreasonable allowance becomes taxable income, but you may then deduct your actual vehicle expenses (with a T2200). Compare both before deciding.

How long should I keep my vehicle log and receipts?

Keep your log and supporting receipts for at least six years from the end of the relevant tax year, in line with general CRA record-retention guidance, so you can defend the claim if reviewed.

Vehicle and Mileage Deductions in Canada: How to Claim Them

Almost every sole proprietor and many employees use a single vehicle for both personal and business driving. That is perfectly fine — but it is also one of the areas the CRA scrutinizes most, because so many people simply "pick a number" for their business-use percentage. The cure is unglamorous and effective: a vehicle log. This guide, drawn from tax lawyer Dale Barrett’s "Pay WAY Less Tax!", explains how the business-use percentage works, what expenses you can claim, and why the log is non-negotiable.

How is the business-use percentage of a vehicle calculated?

You can only deduct the portion of your vehicle costs that relates to earning income. To find that portion, you compare your business kilometres to your total kilometres for the year.

The book gives the formula plainly: record your odometer at the start and end of the year, total the business kilometres from your log, and divide. "15,000 km business / 20,000 km total = 75% business use." You then apply that percentage to your eligible vehicle costs.

Step 1: Note your odometer reading at the start of the year.
Step 2: Log every business trip — date, destination, purpose and kilometres.
Step 3: Note your odometer reading at the end of the year to get total kilometres.
Step 4: Divide business kilometres by total kilometres for your business-use percentage.
Step 5: Apply that percentage to your total vehicle expenses.

Which vehicle expenses can you deduct?

Once you know your business-use percentage, you apply it to the running costs of the vehicle. The book lists the valid categories, and they cover most of what it costs to keep a car on the road.

If you operate through a corporation, the book notes a different mechanism: the corporation can reimburse you for its share of the actual costs, and that reimbursement is not taxable to you if it reflects real expenses — while becoming a deductible expense for the corporation.

Fuel and oil
Insurance
Licensing and registration
Maintenance and repairs
Interest on a vehicle loan, or lease costs

Why is a vehicle log so important?

The book is emphatic on this point. Auditors know people cannot usually substantiate the vehicle percentages they claim, so they "jump on estimates." A log flips the dynamic: with it, the auditor will generally allow your claim; without it, expect a hard time.

As the author puts it: "If you are going to claim vehicle expenses, be prepared to show your vehicle log... Without the log you are up the creek without a paddle." And on the broader lesson: "Moral of the story: Keep detailed logs to support your vehicle expense claims."

For each business trip, record the date, destination, purpose and kilometres
Record odometer readings at the beginning and end of the year
Keep the log contemporaneously — not reconstructed the night before an audit

How do employees claim vehicle expenses versus the self-employed?

The self-employed claim vehicle costs directly against business income using the business-use percentage. Employees who must use their own vehicle for work can also claim vehicle expenses, but they generally need a signed Form T2200 from their employer, and they must account for any vehicle allowance they received.

The book walks through how allowances interact with claims: if your employer pays you a reasonable per-kilometre allowance, it is typically tax-free and you would not also claim the expenses. If the allowance is unreasonable (for example, a flat amount unrelated to distance), it becomes taxable income — but then you can deduct your actual vehicle expenses. The takeaway is to look at both your allowance and your actual costs before deciding how to claim.

This is general information, not tax advice. Tax rules and dollar amounts change every year — verify the current CRA rules or consult a tax professional before you file.

Frequently asked questions

Can I just estimate my business-use percentage?: You can, but it is risky. The book warns that auditors "jump on estimates" and that without a log they will often deny vehicle expenses. The defensible approach is to keep a contemporaneous log of business trips and odometer readings and calculate the percentage from real data.
What exactly goes in a vehicle log?: For each business trip: the date, where you went, the business purpose, and the kilometres driven. You also record your odometer reading at the start and end of the year so you can calculate total kilometres and your business-use percentage.
Which car costs can I deduct?: The business-use share of fuel, insurance, licensing, maintenance and repairs, and interest on a vehicle loan or lease costs. Personal driving is never deductible — only the business portion, set by your log.
I drive for both work and personal trips — is that a problem?: No. Dual-use vehicles are normal and accepted. What matters is that you can distinguish business from personal use, which is exactly what the log does. You then claim only the business percentage.
My employer pays me a car allowance. Can I still deduct expenses?: It depends on whether the allowance is "reasonable." A reasonable per-kilometre allowance is generally tax-free and you would not also claim the expenses. An unreasonable allowance becomes taxable income, but you may then deduct your actual vehicle expenses (with a T2200). Compare both before deciding.
How long should I keep my vehicle log and receipts?: Keep your log and supporting receipts for at least six years from the end of the relevant tax year, in line with general CRA record-retention guidance, so you can defend the claim if reviewed.