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Self-employed
If you have a corporation, then the corporation can pay you or others for business use of a personal automobile (an auto that is not considered an asset of the corporation). The rate for most of the country is 55c per km for the first 5000 km, and 49c per km above 5000.
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/tmbl/llwnc/rts-eng.html
If you are an employee, then you would need a T2200 (Declaration of Conditions of Employment) signed by your employer stating that you were required to use your own vehicle for business purposes. It would also require you to have worked away from your employer's normal place of business, or in different places. Note that driving to and from work is considered personal use, and can not be claimed. If you are reimbursed by the employer, and the reimbursement is not included in the income reported on your T4, then you can not claim vehicle expenses. If the reimbursement is included on your T4 as a taxable benefit then you can make a claim. You do need to know the total km driven for work purposes, however you compare this to the total km driven in the year. You would then take ALL your vehicle expenses for the year, and prorate these expenses based on the ratio of work km to total km.
If you receive a non-taxable reimbursement for driving from your employer, and you can show that the actual work related expense was greater, then you can make a claim for vehicle expenses provided that you also add the reimbursement to your income.
If you are self employed, you still calculate a prorated amount of the actual vehicle expenses based again on km for business compared to total km driven in the year. However, after one year of business you have an option of using a simplified method, I will copy and paste the relevant information from the CRA site:
Simplified logbookYou can choose to maintain a full logbook for one complete year to establish a base year's business use of a vehicle.
After one complete year of keeping a logbook to establish the base year, you can use a three-month sample logbook to foresee business use for the entire year, as long as the usage is within the same range (within 10%) of the results of the base year. Businesses will have to show that the use of the vehicle in the base year remains representative of its normal use.
The business use of the vehicle in the subsequent year will be calculated by multiplying the business use as determined in the base year by the ratio of the sample period and base year period. The formula for this calculation is as follows:
(Sample year period % ÷ Base year period %) × Base year annual % = Calculated annual business use
Where the calculated annual business use in a later year goes up or down by more than 10%, the base year is not an appropriate indicator of annual usage in that later year. In such a case, the sample period logbook would only be reliable for the three-month period it had been maintained. For the remainder of the year, the business use of the vehicle would need to be determined based on an actual record of travel or alternative records, as discussed above. In these circumstances, the taxpayer should consider establishing a new base year by maintaining a logbook for a new 12-month period.
An individual has completed a logbook for a full 12-month period, which showed a business use percentage in each quarter of 52/46/39/67 and an annual business use of the vehicle as 49%. In a subsequent year, a logbook was maintained for a three-month sample period during April, May and June, which showed the business use as 51%. In the base year, the percentage of business use of the vehicle for the months April, May and June was 46%. The business use of the vehicle would be calculated as follows:
(51% ÷ 46%) × 49% = 54%
In this case, the CRA would accept, in the absence of contradictory evidence, the calculated annual business use of the vehicle for the subsequent year as 54%. (I.e., the calculated annual business use is within 10% of the annual business use in the base year - it is not lower than 39% or higher than 59%.)
Even though records and supporting documents are only required to be kept for a period of six years from the end of the tax year to which they relate, the logbook for the full 12-month period must be kept for a period of six years from the end of the tax year for which it is last used to establish business use.
Also, you do need to keep a detailed record of km driven for work/business.
Something else to note...if you work for instance in construction, you might have different sites that you will go to based on work at the time, however CRA has disallowed claiming driving to these sites and back home, claiming that it is merely driving to and from work, and that the work site is considered the normal place of business.
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/bsnssxpnss/mtr/menu-eng.html
