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To handle vehicle expenses for a business, divide the kilometres you drove for work by your total kilometres, then apply that share to the running costs. If you drove 12,000 of 20,000 kilometres for work, 60% of the fuel, insurance and repairs is deductible. The CRA wants a logbook behind that percentage, and it wants receipts behind the costs.
What counts as business use?
Driving to a client, a supplier or the bank for the business counts. A weekend trip to the cottage doesn’t. If a trip mixes both, split it or leave it out. That’s the boring rule, and it’s the one most likely to be questioned.
The CRA says you can deduct only the part of the expenses paid to earn income. Two items escape the split: business parking fees and any extra insurance you bought for the business. Those go in at 100%.
Picture Dana, a self-employed photographer in Hamilton. She drives to a wedding venue, stops for groceries on the way home, then drops a USB drive at a client’s office. The venue and the client trips go in the log. The grocery detour doesn’t.
What should be in the logbook?
For every business trip: the date, the destination, the reason and the distance. Add the odometer reading at the start and end of the year, and keep a separate record for each vehicle if you have more than one. If you buy, sell or trade a vehicle mid-year, note the date and the odometer reading that day.
Here’s the part that saves effort. You can keep a full logbook for one whole year to set a base year. After that, a three-month sample can stand in for the rest, as long as the business use stays within 10% of the base year. If your work changes, say you land a big client across town, start a fresh base year.
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.
Motor vehicle records, canada.ca
A notebook in the glovebox or a phone app works fine. A log written on the spot is far easier to defend than one rebuilt from memory at tax time.
Worked example, and what it saves
Say you’re a freelancer in Ontario with a sole proprietorship. You drove 20,000 kilometres, 12,000 of them for clients, so business use is 12,000 divided by 20,000, or 60%. Your receipts add up as follows.
| Cost | Full year | Business share (60%) |
|---|---|---|
| Fuel | $4,200 | $2,520 |
| Insurance | $2,100 | $1,260 |
| Repairs and maintenance | $1,500 | $900 |
| Licence and registration | $700 | $420 |
| Winter tires | $1,000 | $600 |
| Total | $9,500 | $5,700 |
Those figures are ours, chosen to show the method. What does $5,700 do to your bill? We ran $60,000 and $54,300 of net business income through the self-employed tax calculator for Ontario. Income tax falls from $7,879 to $6,833, and CPP from $6,724 to $6,045. Together that’s $14,603 down to $12,879, a saving of about $1,724. The tool leaves out EI and GST/HST, so treat it as an estimate.
A deduction is never a refund of the whole cost. Here you spend $9,500 to keep about $1,700 back in tax, and only part of that spending was even for work. Still, a ballpark $1,700 is real money.
What goes wrong with vehicle claims?
The usual mistake is a percentage with nothing behind it. “About 70%” is a hard sell with no logbook. Really hard. The second is claiming every trip because they all felt like work. The third is losing receipts, and the CRA allows a deduction only where you have them.
A fourth slip is changing the percentage between years without a reason. If your business use jumps from 60% to 85% because you took on a rural route, the log should show it, and a new base year is the honest way to handle it.
How long do you keep the records?
The CRA’s rule is six years from the end of the tax year the logbook was last used to set your business use. Keep the receipts and odometer notes in the same folder.
What about buying or leasing the vehicle?
Buying or leasing a vehicle brings separate rules for depreciation and limits. Those rules change, so read the CRA’s guide for the T2125 form before you claim any of it. If you get paid by an employer to drive your own car, that’s a different treatment again, and a different page.
Sales tax is a separate question that we didn’t cover here. To see how much GST or HST sits inside a receipt, use the GST/HST calculator. The money you set aside for tax matters as much as the deduction, so try the tax instalments calculator too. Want the salaried view of the same income? Run it through the take-home pay calculator.
The sources behind this page
The rules on splitting costs, logbooks, odometer readings, the base year and six year record keeping come from Canada Revenue Agency pages on motor vehicle expenses, read in 2026. The tax example uses our own calculator with 2026 Ontario and federal rates. The vehicle costs in the table are invented for illustration. This is an independent guide, separate from any government body.
Frequently asked questions
Do I need a logbook to claim vehicle expenses?
The CRA calls an accurate logbook the best evidence. It should show the date, destination, reason and kilometres of each business trip.
Can I use a three month logbook?
Yes, after you keep a full year as a base year. The sample works while your business use stays within 10% of that base year.
Which vehicle costs are not split between business and personal use?
Business parking fees and extra insurance bought for the business.
How long do I keep my vehicle records?
Six years from the end of the tax year they relate to.
Does the calculator include the cost of buying or leasing a vehicle?
No. We didn't verify the 2026 limits on depreciation, leasing or interest, so check the CRA guide for form T2125.
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST