How to Keep a Mileage Log to Claim Motor Vehicle Expenses
You Must Have a Log Book to Substantiate Your Automobile Expense Claims
If you have used one or more of your vehicles to earn business income over the past year, you can claim the related expenses as a business expense on your income tax in the U.S. and Canada by using a mileage log. (What Motor Vehicle Expenses Can You Claim on Income Tax? details what expenses you can claim and how to claim them.) But as always, if you want to deduct these expenses, you need to be able to substantiate your claim with evidence in the form of an automobile mileage log book.
How to Keep a Mileage Log
Both the Internal Revenue Service (IRS) and the Canada Revenue Agency (CRA) state that keeping an accurate logbook of business travel maintained for an entire year is the best evidence you can have to support your motor vehicle expense claims.
The following information should be recorded in the log book each time the vehicle is used for business purposes:
- the date,
- the starting point,
- the destination,
- the purpose of your trip;
- the vehicle starting mileage,
- the vehicle ending mileage,
- the total miles (or kilometers in Canada) driven.
Sample Mileage Log
Mileage log books are typically available at office supply stores or you can use the following template which can be copied into a Word, Excel or similar office document by selecting the text and using copy/paste (using Windows, outline the text to be selected with the mouse, and hit CTRL-C to copy and CTRL-V to paste).
|Date||Mileage Start||Mileage End||Mileage Total||Business Purpose||Park$||Tolls$||Other$|
Automatic Mileage Tracking
Manually entering trip information in a log book is tedious, particularly if you make a lot of business trips. Fortunately there are several mileage tracking applications available for Apple and Android smartphones that make use of the phones GPS to keep track of every mile/kilometre driven for business purposes.
For a small monthly fee the app will log your business trip information and enable you to download a mileage summary your tax return. Some of the more popular mileage tracking apps include:
- MileIQ (IOS and Android)
- Mileage Expense Log (IOS only)
- TripLog (IOS and Android)
- QuickBooks (mileage tracking is included with QuickBooks Self-Employed)
Business Use Versus Personal
Both the IRS and the CRA are vigilant about excessive claims for business use of personal vehicles - claiming most or all of your vehicle mileage for business use is a sure way to attract extra scrutiny from the tax authorities and a possible audit. (See 10 Red Flags That Will Get Your Canadian Small Business Audited.)
Therefore when it comes time to claim your motor vehicle business expenses, you will need to know how many non-business related miles or kilometres you drove, and the easiest way to do this is to figure out how many total miles or kilometres you’ve driven over the course of the year by comparing your vehicle’s odometer reading at the end of the tax year to what it was at the beginning of the year.
Then, once you have your data for the year, to calculate your motor vehicle expenses claim you need to tally all the miles/kilometres you’ve driven for business use over the course of the year.
Your personal use is then the total mileage for the year minus the business mileage.
Business Use Versus Personal for Employees
Employees that use of company vehicles must also keep track of mileage driven for business purposes versus personal use mileage. Mileage driven for personal reasons is a taxable benefit that has to be included in employee income. Note that mileage driven to and from a regular place of employment (other than a point of call) is considered to be commuting and is classed as personal use.
Make sure you have a clear policy on the personal use of company vehicles, including:
- who can drive the vehicle (e.g. employee only, spouse, etc.)
- what is allowable for personal use - for example, using a company truck to tow a camper or boat
- how to keep accurate mileage records
Good News for Canadian Taxpayers – You Can Use a Simplifed CRA Mileage Log as Proof
To use a simplified logbook:
- You must have previously maintained a mileage log for one complete year to establish a base year’s business use of a vehicle.
- You must have kept this logbook for one complete year in 2009 or a later year.
- Your business use of your vehicle for the year you are using the simplified logbook must be within 10% of the results of your business use of your vehicle you recorded for the base year.
The CRA also says that businesses will have to show that the use of the vehicle in the base year remains representative of its normal use.
All of these things being true, you would then be able to keep a logbook for just three months and then calculate your business use of vehicle by multiplying the business use as determined in the base year by the ratio of the sample period and base year period, by using this formula:
(Sample year period % ÷ Base year period %) × Base year annual % = Calculated annual business use
Notice that to do this, you will have to know what your business use percentage was for the particular three month period in the year that you are using as a base year so you can compare it to your new sample year period.
So if, for example, I have kept a simplified CRA mileage log for January, February and March of last tax year, I also need to know what my percentage of business use of my vehicle was in January, February and March during my base year when I kept a mileage log for the entire year.
Here’s an example:
Suppose that I kept a simplified logbook for the first three months of the year and find that my business use of vehicle percentage is 64%.
I go back to my complete full year mileage log for the 2015 tax year, which I’ve chosen to use as my base year, take a look at the records for January, February and March, and find that my business use of vehicle percentage during that time was 68%. My percentage of using my vehicle for business purposes for that entire base year was 70%.
Then, applying the formula to extrapolate my three months of data in my simplified logbook to cover the entire year:
(64% ÷ 68%) x 70% = 65%
So 65% is the annual business use of vehicle percentage that I am claiming using my simplified logbook data – a figure which will be acceptable to the Canada Revenue Agency because it falls within the 10% allowable range of variation.
For more details about claiming business expenses related to using your vehicle to earn business income, see What Motor Vehicle Expenses Can You Claim on Income Tax in Canada?
Vehicle Purchase Expenses and Capital Cost Allowance in Canada
If you have bought a vehicle to use in your business, you will also want to read Motor Vehicle Expenses Related to Buying a Vehicle, and How to Claim CCA (Capital Cost Allowance) on a Vehicle Bought for Business Use which explains how to write off the cost of your automobile through Capital Cost Allowance.