The Need for an <br>Automobile Expense Log

The Need for an
Automobile Expense Log

  • 2
  • May 12, 2012

If you use a vehicle to earn income for your company, it may claim various expenses such as lease payments, gas, insurance, repairs, interest and capital cost allowance (if the vehicle is owned and financed).  Generally the company can deduct the majority of these expenses (with certain restrictions applying to lease payments, interest and capital cost allowance claims based on the purchase price of the vehicle).

The issue with “company owned” cars is how much of the use is personal? If an individual personally uses a company car, he must either reimburse the company for the use or be assessed an annual taxable benefit that is reported on his T4 slip for the year. Company owned and leased vehicles are a “red flag” for the CRA because it gives them a reason to review whether other potential personal use benefits are being calculated and reported correctly… And… While they are looking at cars, they will take the time to look at other expenses (such as entertainment and promotion, travel etc.)

If you use a car for business purposes (as a condition of your employment) the same expenses can be deducted on your personal income tax return (pro-rated for business use) if you pay the expenses yourself and are not reimbursed for them. However, the issue here with CRA is whether you are claiming the correct amount of business and personal use on your annual personal income tax returns.

In order to substantiate business and personal use of vehicles the CRA requires individuals to maintain a log of their driving. In dealing with CRA on account of vehicles, we have found that a diligent, well kept log is the only documentation that it will accept to verify business use. Please watch your mail box for an auto log booklet that we will be sending during December that you should use to track your vehicle use during 2014. If you do not receive one by December 20, 2013 please contact us.

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