Vehicle deductions are one of the most common reasons the CRA audits self-employed Canadians. Claim too much, keep sloppy records, or skip the logbook entirely, and you’re asking for trouble.
The good news: if you track things properly, vehicle expenses can be one of your biggest legitimate deductions.
What vehicle expenses you can deduct
If you use your vehicle for business, you can deduct a portion of your actual operating costs. The key word is portion (more on that below).
| Deductible | Not Deductible |
|---|---|
| Fuel and oil | Parking tickets and traffic fines |
| Insurance | Personal-use portion of any expense |
| Maintenance and repairs | Capital cost of the vehicle (claimed separately via CCA) |
| License and registration fees | Car washes for personal trips |
| Lease payments (with limits) | Commuting from home to a permanent workplace |
| Interest on a car loan (with limits) | |
| Capital Cost Allowance (CCA) on owned vehicles | |
| Parking fees and tolls for business trips |
Lease payment limits: The CRA caps the deductible portion of lease payments. For 2025, the limit is $1,050/month (before tax). If your lease is $1,200/month, you can only base your deduction on $1,050.
CCA (depreciation): If you own your vehicle, you can’t deduct the purchase price directly. Instead, you claim Capital Cost Allowance over several years. Most passenger vehicles fall into Class 10 (30% declining balance) or Class 10.1 if the vehicle cost more than $37,000.
Business-use percentage: how to calculate it
You can only deduct the business-use percentage of your vehicle expenses. The formula is straightforward:
Business-use % = Business kilometres / Total kilometres driven that year
A concrete example: you drove 25,000 km total this year. 15,000 were for business. Your business-use percentage is 60%. If your total vehicle costs were $8,000, you can claim $4,800.
That’s it. No rounding up, no guessing. The CRA expects you to back this number up with a logbook.
The CRA logbook requirement
The CRA requires you to keep a vehicle logbook to support your business-use claim. If you get audited and don’t have one, your entire vehicle deduction can be denied.
Every entry in your logbook must include:
- Date of the trip
- Destination (client name, meeting location, job site)
- Purpose of the trip (delivery, client meeting, site visit)
- Kilometres driven for that trip
You also need to record your odometer reading at the start and end of the year so the CRA can verify your total kilometres.
Example logbook entries
| Date | Destination | Purpose | Km |
|---|---|---|---|
| Jan 15 | 200 Bay St, Toronto | Client meeting, ABC Corp | 34 |
| Jan 16 | Home Depot, Mississauga | Purchased supplies for project | 22 |
| Jan 18 | 55 University Ave, Toronto | Delivered final report to client | 28 |
| Jan 22 | Staples, Brampton | Office supplies | 18 |
| Feb 3 | 100 Queen St W, Toronto | Consultation, new client intake | 40 |
Personal trips don’t need individual entries, but your total personal kilometres must be trackable (total km minus business km).
Full logbook vs. simplified method
Keeping a logbook for every single trip, all year, every year is tedious. The CRA knows this, so they offer a simplified method once you’ve established a base year.
Full logbook (required for at least one full year): Track every business trip for a complete 12-month period. This becomes your base year and establishes your typical business-use percentage.
Simplified method (subsequent years): After your base year, you only need to keep a logbook for one representative three-month period each year. If that sample period’s business-use percentage is within 10% of your base year, you can use the base year percentage for the full year.
If your business changes significantly (new clients, different territory, switch from part-time to full-time), you’ll need a new base year.
The CRA’s full breakdown of the simplified method is in Guide RC4070.
Common mistakes that trigger audits
Claiming 100% business use. Unless you have a dedicated work vehicle that never leaves the job site, the CRA won’t believe your personal car is used 100% for business. Even rideshare drivers who work full-time rarely hit 100%. Be honest. An 80% claim with a solid logbook is far better than a 100% claim with no records.
Not separating personal and business use. “I use it for both” is not a deduction strategy. You need actual numbers: total km, business km, and the math to back it up.
No logbook at all. This is the most common one. People estimate their business use, claim the deduction, and hope they never get audited. When they do, the CRA disallows the entire claim. Years of deductions, gone.
Forgetting to record the odometer. Write down your odometer reading on January 1 and December 31 every year. Without this, the CRA can’t verify your total kilometres, and your logbook loses credibility.
Double-dipping on CCA and lease payments. You claim CCA if you own the vehicle. You claim lease payments if you lease it. Never both.
Special rules for rideshare and delivery drivers
If you drive for Uber, Lyft, DoorDash, Skip the Dishes, or similar platforms, a few extra rules apply.
Higher business-use percentage. Gig drivers often have a legitimately high business-use percentage (60%, 70%, sometimes higher). That’s fine, as long as your logbook supports it. Track every shift: when you went online, where you drove, when you went offline.
HST on vehicle purchase. If you’re registered for GST/HST (required once your revenue exceeds $30,000), you can claim an Input Tax Credit for the HST paid on your vehicle purchase, proportional to your business-use percentage. On a $30,000 vehicle in Ontario, that’s up to $3,900 in HST, with the business portion claimable as an ITC.
Wear and tear is real. Rideshare and delivery work puts significantly more kilometres on your vehicle than a typical freelance business. Make sure you’re tracking maintenance and repair costs. They add up and are fully deductible (at your business-use percentage).
For a full breakdown of gig driver tax obligations, see our guide on filing taxes for rideshare and food delivery.
How to make this easier
The biggest barrier to claiming vehicle expenses properly is consistency. You need to log trips as they happen, not reconstruct them from memory in April.
Accountly tracks your mileage automatically. No spreadsheets, no forgetting to write things down at the end of the day. It calculates your business-use percentage and keeps your logbook CRA-ready year-round.
If you’re self-employed and driving for work, this is one deduction worth getting right. For a broader look at what else you can claim, check out our freelance tax guide.
Frequently asked questions
Can I use a GPS app instead of a paper logbook?
Yes. The CRA accepts digital logbooks as long as they contain the required information: date, destination, purpose, and kilometres. A GPS-based app that records trips automatically is actually more reliable than a paper log, since it’s harder to fabricate after the fact.
What if I forgot to keep a logbook this year?
You can still claim vehicle expenses, but you’re taking a risk. If audited, you’ll need to reconstruct your business use from other records: calendar entries, client invoices, GPS history. The CRA may accept a reasonable reconstruction, but they may also deny the claim entirely. Start your logbook now.
Do I need a separate vehicle for my business?
No. Most self-employed Canadians use one vehicle for both personal and business purposes. You just need to track and separate the two. The logbook exists precisely for this reason.
Can I deduct my commute to a co-working space?
Generally, no. If you go to the same co-working space every day, the CRA treats that as a regular commute, which is personal use. However, trips from your home office to client locations, project sites, or varying work locations are considered business travel and are deductible.
What’s better, leasing or buying for tax purposes?
It depends on your situation. Leasing lets you deduct payments immediately (up to the CRA cap), while buying means you claim CCA over several years. Leasing can provide a larger upfront deduction but costs more over time. If you drive a lot of kilometres for work, buying often makes more financial sense. Talk to an accountant about your specific case.
How far back can the CRA audit my vehicle expenses?
The CRA can reassess your return up to three years after the original notice of assessment for most situations, and up to six years if they suspect negligence or misrepresentation. Keep your logbooks and receipts for at least six years.
Try Accountly
