One way to increase your small business profitability is to claim all of the deductions available to you. If you are using your motor vehicle for business purposes it is in your best interest to keep track of your expenses to claim as an expense on your tax return. You will need to keep all of your receipts for these expenses in case Canada Revenue Agency requests supporting documentation.
Keep in mind that your claimed expenses are pro-rated based on the percentage of kilometers driven for business purposes. This means that you will need some planning if you plan to claim any vehicle expenses – most importantly a log book to track your kilometers driven for business purposes.
You will need to know the make, model and year of your vehicle in order to claim any deductions. You will also be required to provide the total kilometers driven for the year as well as the total kilometers driven for business purposes. You should keep a log book to record the starting and ending kilometers for the year as well as all kilometers driven for business purposes. This should include the date, destination and reason for each trip. Travel between work and home is normally considered for personal use.
Fuel & Oil
You must keep all of your gas and oil receipts related to business purposes in order to claim this deduction. As well, if you decided to buy cigarettes or candy and it is listed on the same receipt, only the expenses relating to the vehicle should be included when adding up the receipts.
This expense includes your vehicle insurance. When you drive your personal vehicle for business use you should also be insured for business driving.
Licence & Registration Fees
This might include your drivers license – for example a taxi driver would require it to be in business. It might also include any other fees involved in using your motor vehicle for business. For example a truck driver may have to pay a fee to an association in order to drive.
Repairs & Maintenance
Items that could be deducted under the repairs & maintenance category include but are not limited to normal wear and tear on the vehicle. For example a taxi driver may require brakes or oil changes more often.
Lease Payments vs Interest or Finance Charges
You may be able to claim a portion of your lease payments on your vehicle. If you own your vehicle and pay interest on a loan from the bank, this may also be deductible. It is important to note that if you change the vehicle you are driving you will require a copy of your purchase / sale agreement or a copy of the lease agreement.
Depending on your line of work expenses such as parking, vehicle washes, vehicle rentals or 407 ETR expenses may be deductible.
Download our FREE Vehicle Expense Schedule to help you stay organized when tracking your expenses
It is very important to note that these expenses are guidelines only and what you are eligible to claim may be different. It is always best to speak with a professional about your financial matters. James Walker is always available to answer your questions. Please call (905) 272-4000 to schedule an appointment.