Best Way to Track Your Vehicle's Business Mileage

Updated December 2024

Maximizing Vehicle Expense Deductions for Canadian Business Owners in 2024

If you own a vehicle that you use for both personal and business purposes, you're probably looking for ways to maximize your tax deductions for the business-related portion. Here's what you need to know—and how to keep CRA happy while you're at it.

The Common Mistake: Guesstimating Mileage

I’ve met plenty of business owners who, when tax season rolls around, casually estimate a percentage of vehicle use for their business. While it’s tempting to skip the record-keeping, this approach can land you in hot water if CRA decides to audit your claim. Without a proper mileage log, CRA could disallow every single dollar of your vehicle expense deductions.

What Counts as a Business Trip?

A major CRA pitfall is misunderstanding what qualifies as a business trip. Driving from home to your place of business doesn’t count as a business trip—sorry, that’s considered commuting. To illustrate:

Would you reimburse an employee for driving to work?

No? Then CRA won’t allow you to claim it either.

On the other hand, if you’re carrying business supplies from your home or stopping at a supplier to pick up goods, part of that trip could count as business-related. Just make sure you have clear documentation to back it up. We have another post that dives deeper into this topic, check it out!

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How to Properly Claim Business Mileage

You have two main options for claiming business mileage:

Option 1: Detailed Mileage and Expense Tracking

1. Record all mileage (date, number of kilometers, and purpose).

2. Classify each trip as business or personal.

3. Track all vehicle expenses (gas, insurance, maintenance, etc.).

4. Allocate expenses based on the percentage of business mileage.

This method gives you full CRA-proof documentation and ensures you claim every dollar you’re entitled to. However, the downside is obvious: it’s time-consuming.

Option 2: Flat-Rate Reimbursement for Business Mileage

1. Track only your business mileage (date, kilometers, and purpose).

2. Use the CRA-approved reimbursement rate to calculate your claim.

For 2024, CRA’s rates are:

• $0.68/km for the first 5,000 km

• $0.62/km for additional kilometers

This approach is much simpler, especially if you already use flat-rate reimbursements for employees. It works well for most vehicles, as the flat rate generally covers operating costs like fuel, maintenance, and insurance.

Keep in mind, the CRA revises the rates every year. Check here for updated rates.

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Which Option is Best for You?

Both options require some tracking, but here’s how to decide:

• Option 1 is better if you drive a gas-guzzler (like a large truck) or frequently drive on rough roads, where wear and tear significantly increases vehicle expenses.

• Option 2 is easier and works well if your business trips are routine and your vehicle has average operating costs.

With either option, any reimbursement from your company is tax-free, so that’s a win.

Tracking Mileage Efficiently

No matter which option you choose, the key to success is accurate tracking. Two key ways to track are: Paper Tracking or Milage Tracking Apps.

For Paper Tracking, a simple notebook works fine if you have infrequent, larger business trips.

For frequent or smaller trips, automating the process with a Mileage Tracking App saves time and reduces the risk of missing anything.

Here are three popular options:

1. MileIQ

   • Often included with Office 365 business subscriptions, making it a solid choice for convenience.

2. Everlance and TripLog

   • These apps track mileage and allow you to upload expense receipts, perfect for detailed tracking under Option 1.

3. GoFar

   • Comes with a device that plugs into your vehicle’s computer to track mileage, fuel usage, car faults, and more.

Final Thoughts

Getting your vehicle expense deductions right isn’t rocket science—it just takes a little organization. Whether you opt for detailed tracking or a flat-rate reimbursement, keep clear and accurate records. And if you’re not sure about anything, don’t hesitate to reach out.

Tax season doesn’t have to be stressful—just stay ahead of CRA’s requirements, and you’ll be set!

Any other questions? Reach out!