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How to deduct car expenses as a business owner in Canada

Updated: Oct 28


If you are a business owner who uses a vehicle for work, you may be eligible to claim car-related expenses and reduce your taxable income. Here’s what you need to know to get the most out of this deduction while staying on the good side of the CRA.



Car keys in front of a red car


What to Track


To accurately calculate and claim car expenses, you’ll need to keep detailed records of the following:

  • Business Mileage: Keep a logbook to record each business trip (client visits, business lunches, even driving to pick up office supplies). Note the date, purpose, and kilometers driven.

  • Total Mileage: Write down your odometer reading every January 1st, to have your total yearly mileage.

  • Fuel Costs: Keep all gas receipts. (Tip: gather them in a little envelope in your car, or use your gas station's app to save them automatically).

  • Maintenance & Repairs: Oil changes, tires, brake replacements - anything that keeps your car safely on the road.

  • Loan Interest: You can't deduct the car loan itself, but you can deduct the interest.

  • Insurance

  • License & Registration Fees



How to Calculate Your Deduction


  1. Determine Your Business-Use Percentage Use your logbook to calculate the percentage of total kilometers driven for business.

    Example: If you drove 20,000 km in total and 5,000 km were business-related → 25% business use.


  2. Apply the Percentage Multiply your total car-related expenses by your business-use percentage.

    Example:

    • Total car expenses (fuel, insurance, maintenance, etc.): $10,000

    • Business-use percentage: 25%

    • Deductible car expenses: $10,000 × 25% = $2,500



How to Keep Track of Business Mileage


Choose the method that works best for you:

  • Apps like MileIQ or QuickBooks Online - These use GPS to automatically log your trips

  • Pen & paper - Keep a simple notebook in your car and write down trips as they happen (not high-tech, but very CRA-approved!)



Pro Tip: Keep Detailed Records


The CRA requires solid evidence for your claim. That means: keep your gas receipts, mileage logs, maintenance invoices, and insurance statements. A little organization now can save you a lot of headaches if the CRA ever comes knocking.



Need Help (or a Template)?


Not sure if you're tracking everything correctly? No worries, I’m here to help. I even built a simple Excel template that makes logging your mileage and expenses a breeze. It's free for my bookkeeping clients.


Curious to learn more? Have a look at my website or contact me for a free consultation.


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Hi, I'm Katrien. With Second Banana Bookkeeping & Advisory, I help coaches, consultants and health professionals translate their numbers so they can make smarter, and calmer business decisions.



 
 
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