How do I track vehicle mileage for the CRA?

What the CRA requires in a mileage logbook

A CRA-compliant logbook records the date of each trip, the destination, the business purpose, and the kilometres driven, along with the odometer reading at the start and end of the year so total kilometres driven can be calculated. This full logbook needs to run for a complete 12-month period the first year vehicle expenses are claimed, establishing a base year against which future years can be compared.

The point of the full base year is to smooth out seasonal driving patterns. A landscaper who drives far more in the summer than the winter, or a sales rep whose territory visits cluster around quarter-end, needs a full year on record before a shorter sample period can be trusted to represent typical driving.

Apps such as MileIQ or the mileage tracker built into QuickBooks Online use a phone's location to log trips automatically, which removes the need to write anything down after the fact and is far more reliable than reconstructing a year of driving from memory in April. These apps still require the driver to tag each trip as business or personal, so the discipline of classifying trips correctly does not disappear just because the distance is tracked automatically.

Whichever method is used, the logbook needs to be kept alongside the rest of the business's records, not stored separately where it can be misplaced. If a review ever asks for support behind the vehicle expense claimed on a return, the logbook is the document that gets produced first, and a gap of even a few weeks in it weakens the whole year's claim.

How the simplified logbook works after your first year

Once a full base year is on record, the CRA's administrative policy allows a simplified logbook: a three-month sample period logged in detail each subsequent year, used to estimate the full year's business-use percentage, provided that percentage stays within 10% of the business-use percentage from the base year. If a driving pattern changes significantly, a new job site, a new client territory, or a shift from mostly on-site to mostly remote work, a new full-year logbook is the safer approach rather than relying on a sample that no longer reflects reality.

The sample logbook does not remove the need to record the odometer reading at the start and end of the year; it only shortens how many months of detailed trip-by-trip entries are required. Skipping the annual odometer readings, even in a simplified year, leaves no way to confirm the total kilometres the business-use percentage is being applied against.

What counts as business driving and what does not

Driving to meet a client, pick up supplies, attend a job site, or travel between two work locations counts as business use. Driving from home to a regular, fixed place of work does not; the CRA treats that as personal commuting regardless of how essential the vehicle is to the business. This distinction trips up a lot of owners who assume that because a vehicle is used entirely for the business, every kilometre driven in it must be too.

A contractor who drives from home directly to a client's site rather than to a fixed office is generally in a better position, since that trip can usually count as business use, but the logbook still needs to document the destination and purpose to support that treatment rather than assuming it is automatically covered.

Mixed-purpose trips need judgment too. A drive that combines a work stop with a personal errand on the way is not automatically all business or all personal; the logbook should reflect the actual purpose of the detour, and a business-use percentage that never shows any personal driving at all is one of the details a reviewer is likely to question.

Corporate allowance versus a personal deduction

An owner who holds a vehicle personally and uses it for a sole proprietorship deducts the business-use percentage of actual vehicle expenses, fuel, insurance, maintenance, and capital cost allowance, on the T2125, calculated from the logbook. If a corporation owns the vehicle instead, personal use of it creates a taxable benefit reported on a T4, a topic covered in can my corporation pay for my car.

A corporation can also pay a per-kilometre allowance for business use of an employee's or owner's personal vehicle instead of owning a vehicle itself; the CRA sets a reasonable rate each year, so it is worth confirming the current rate before setting one, since an allowance set too high can itself become a taxable benefit rather than a tax-free reimbursement.

An owner who has a choice between the two often finds the personal-vehicle allowance simpler, since it avoids the corporation owning an asset that needs to be tracked for capital cost allowance, insured under a commercial policy, and eventually disposed of. A corporation that owns several vehicles across a fleet, on the other hand, usually gains more from owning them directly and managing the taxable benefit calculation for each driver.

How we advise clients on vehicle use

As part of our bookkeeping and tax work, we help clients set up an automatic mileage app before the first full year starts, so the base-year logbook is solid from day one, and we review the business-use percentage each year to confirm the simplified logbook still applies. For clients in skilled trades and other vehicle-heavy businesses, getting this right is often one of the larger deductions on the return, and it is one of the first things we check when a new vehicle-heavy client's prior-year records look thin.