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As many of you know, if you use your vehicle for business purposes, and you wish to deduct vehicle expenses from your income, you are required to keep a logbook. A vehicle log supports and documents the actual business use of the vehicle. Most of us use our vehicles for both business and personal purposes. By keeping a logbook, we are able to identify the exact usage that relates to business.
Keeping a logbook really isn’t that difficult. To begin, you document the odometer reading at the start of the year. Next, during the year you log business trips made with your vehicle. For example, if you visit a client at their business place, you should record the date of the trip, the distance, and the purpose of the visit. Finally, at the end of the year, record the vehicle’s closing odometer.
By following these steps, we can very easily determine the business portion of the vehicle, by simply adding up the business kilometres, and dividing this by the total kilometres driven. To illustrate, suppose your business kilometres add up to 10,000, and the total distance driven with the vehicle during that year was 20,000.
That means that you can claim 50% of your vehicle costs as business use vehicle expenses. In the past, you were required to keep a log book all year, every year.
The new CRA logbook policy still requires to keep a full 12 month log to establish a “base year.” Following that base year, you only need to keep a log book for 3 months of the year, referred to as the “sample period.” This sample period will be used to determine your full year’s usage. However you cannot use the sample period if:
· You have not previously completed and retained a logbook covering a full 12-month period (the base year).
· You have not kept a 3 month sample period logbook for each year since then.
· The business use of the vehicle changes by more than 10 percent, either up or down.
To summarize, CRA recognizes that maintaining a log book is difficult, and has tempted to make things easier for small businesses.
Keeping a logbook really isn’t that difficult. To begin, you document the odometer reading at the start of the year. Next, during the year you log business trips made with your vehicle. For example, if you visit a client at their business place, you should record the date of the trip, the distance, and the purpose of the visit. Finally, at the end of the year, record the vehicle’s closing odometer.
By following these steps, we can very easily determine the business portion of the vehicle, by simply adding up the business kilometres, and dividing this by the total kilometres driven. To illustrate, suppose your business kilometres add up to 10,000, and the total distance driven with the vehicle during that year was 20,000.
That means that you can claim 50% of your vehicle costs as business use vehicle expenses. In the past, you were required to keep a log book all year, every year.
The new CRA logbook policy still requires to keep a full 12 month log to establish a “base year.” Following that base year, you only need to keep a log book for 3 months of the year, referred to as the “sample period.” This sample period will be used to determine your full year’s usage. However you cannot use the sample period if:
· You have not previously completed and retained a logbook covering a full 12-month period (the base year).
· You have not kept a 3 month sample period logbook for each year since then.
· The business use of the vehicle changes by more than 10 percent, either up or down.
To summarize, CRA recognizes that maintaining a log book is difficult, and has tempted to make things easier for small businesses.
