Vehicle expenses – simplified logbook for deductions? Think again!

Posted on: June 6th, 2014 by Real Estate Accountants 2 Comments
Car

Note: This article originally appeared on georgeEdube.com.

Doing a logbook for all your motor vehicle expenses is hard work. You have to consistently record the trips you make related to your real estate business, such as driving to and from Home Hardware to buy paint supplies or from your business to meet a customer.

In 2010, the Canada Revenue Agency introduced a new “Simplified Logbook” for recording motor vehicle expenses. Essentially, you can keep a logbook for a “sample period” of time instead of for the full year. To use a simplified logbook, you have to, of course, meet a few requirements:

  • You must have previously filled out a logbook for a full 12-month period typical for the business (the base year)
  • You have to maintain a logbook for a sample period of at least one continuous 3-month period in each subsequent year (the sample year period)
  • The distance travelled in the 3-month sample period is within 10% of the same period in the base year
  • The annual business use of the vehicle in a subsequent year doesn’t change by more than 10% (up or down) compared to the base year.

Well, I don’t know about your business, but predicting that I’ll be within 10% of the same mileage in the same 3 month period year over year is about as likely as me winning the lottery. So, I’d recommend waiting before throwing away your old detailed car log.

The simplified logbook has two main problems:

  1. It will only meet the CRA standards under limited cases where the business has a very consistent number of business kilometres per year.
  2. It actually makes it easier for the CRA to deny your vehicle expenses. They know it’s onerous to fill out a full car log. So, they let you do a simple one. And, if you don’t even do that, then it makes it very easy for them to deny all your vehicle expenses.

So, do a full one!

Note: When we first posted this blog in 2010, it was a popular one so we we thought it would be a good idea to bring it out from the archives. Hope you once again found it useful!

George E. Dube, CPA, CA 
gdube@bdo.ca

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2 Responses

  1. Mike Kohan says:
    June 19, 2014 at 11:37 am

    Thank you for the advice on the simplified log book.
    For the full year record, is recording the details of only the business use trips required, or do I need to detail the personal trips as well?
    Thank you in advance for your time and advice.

    • Dube & Cuttini says:
      June 19, 2014 at 2:03 pm

      Hi Mike,

      Thanks for the question. You only need to keep track of the mileage for business trips. In addition, you will want to keep a record of what the total mileage of the vehicle was at the beginning, and end of the year.