WHAT IS THE CRA LOGBOOK METHOD?

Photo: katemangostar

The Canadian Revenue Agency (CRA) allows people to claim the use of their car for work as a tax deduction. 

One of the allowable ways to claim is by the ‘logbook method’. The logbook method allows people to claim a % of all of their vehicle expenses based on how much the vehicle is used for work. 

The logbook is used to keep a record of the trips you make in your car to calculate the actual percentage of business use. You can then claim the percentage of your fuel, insurance, servicing, depreciation and all other car related costs.

 

The ‘Full CRA Logbook’

If you have not used a logbook before you must first keep a full logbook. For the entire fiscal year you must keep the following records.

For every trip (travelled for work), write down the following:

  • Date of the trip
  • Trip destination
  • The business purpose of the trip
  • The odometer reading and km travelled

You must also keep a recotd of the odometer reading at the start and end of the fiscal period.

Simplify then add up the number of business km in the year and calculate the percentage of business use. Then add up all of your eligible car costs and you are entitled and apply the business use percentage to calculate your allowable claim.

 

 

The ‘Simplified CRA Logbook’

If you have already done a Full logbook in the previous year, then you may choose to do a simplified logbook thereafter. The simplified logbook requires keeping trip records for only 3 months instead of doing it again for an entire year. 

The simplified logbook is a good choice as it reduces the amount of record keeping required from 12 months to just 3 months. You may use the Simplified logbook method as long as the annual business use percentage does not go up or down more than 10%.

Note that the same records need to be kept for each trip in the 3month period as for the full logbook.

The original full logbook is used as a baseline and the simplified logbook is used to calculate an adjustment for each subsequent year that is claimed.

CRA defines the adjustment calculation like this:

 

Claimable Business use percentage = (Simplified logbook period % ÷ Full logbook period %) × Full logbook annual %

 

If you use more than one vehicle for your business, you will need to keep separate logbooks for each vehicle that shows the total and business kilometres you drive. You will also need to keep receipts and records of expenses for each vehicle separately.

 

Find out more about how GOFAR can help you file your tax return. Or get GOFAR today and watch it bring in the results as you drive.

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