How the Self-Employed Claim Mileage On Their Taxes

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How the Self-Employed Claim Mileage On Their Taxes

If you drive your own personal vehicle for business purposes, the CRA lets you claim that mileage on taxes.

Let’s go over how the self-employed can get a deduction for their mileage.

How to claim mileage on your taxes

The CRA knows there’s a cost to using your personal vehicle for business reasons. That’s why it allows you to claim motor vehicle expense for some tax relief. This deduction can lead to some large savings on your income tax bills.

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How to calculate your deduction

You can deduct the kilometres related to your business drives. The value of that deduction depends on how much you drive during the year.

The CRA has an easy-to-follow formula for calculating your deduction for mileage:

(Business Kilometres ÷ Total Kilometres) X Total Vehicle Expenses = Motor Vehicle Expense Deduction.

For example, let’s say your total expenses for your vehicle were $5,400. This includes license and registration fees, gas, interest, insurance and maintenance. If you drove 30,000 kilometres for the year and 27,000 of those were for business, you’d get a deduction of $4,860

(27,000 business kilometres ÷ 30,000 kilometres) X $5,400 = $4,860.

You can also add any parking fees or other business insurance with your motor vehicle expense deduction.

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What the CRA requires from your logbook

Of course, the CRA isn’t just going to take your word for it. You have to keep accurate and detailed records. This often comes in the form of a mileage log or a logbook.

Your mileage log must include a record of all your drives and for your business trips, you should have:

  • The destination
  • Date of the trip
  • The business purpose
  • Number of kilometres you drove.

It’s best to also record your odometer reading at the beginning of the tax year. If you don’t have proper documentation, the CRA can disallow your deduction. It can also impose fees and penalties. So, it pays to keep a proper mileage log.

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Marin Perez

Marin has been writing about how technology improves lives for about a decade. He's excited to see how entrepreneurs are using tools like MileIQ to be more successful. When not working, he's thinking about his next trip.

MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.

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