Deducting car expenses when you're self-employed in Canada

Self-employed people in Canada don't claim a per-kilometre rate. They deduct the business share of their actual car expenses, and that share comes from a logbook of business and total kilometres. After one full year of logging, the CRA lets you keep a three-month sample each year instead.

Work out your business-use share

Business-use percentage = business kilometres ÷ total kilometres for the year. Apply it to your car expenses: fuel, maintenance and repairs, insurance, licence and registration, interest on a car loan, leasing costs, and capital cost allowance (depreciation).

What the logbook needs

For each business trip: the date, destination, purpose and kilometres.
The odometer reading at the start and end of the year.

The simplified logbook

Keep a full logbook for one representative 12-month base year. In later years, a logbook for one continuous three-month sample period is enough, as long as the sample's business use is within 10% of the same period in the base year. The base-year logbook is then scaled to the whole year.

Where it goes

Car expenses go on Form T2125, Statement of Business or Professional Activities. Keep the logbook and receipts for six years.

Employees are different

If you are an employee, your employer may pay a reasonable per-kilometre allowance at the CRA rate, which is tax-free. See the rate page for the current amount.