Motor Vehicle Expenses — Montreal CPA Firm Near You: Deducting Car Expenses for Business, Logbooks, CCA, and CRA Compliance

Motor vehicle expenses are one of the most commonly claimed—and most frequently reviewed—business deductions by the CRA. Self-employed individuals, contractors, gig workers, professionals, and partners in a business partnership may deduct vehicle expenses they incur to earn business income. But the CRA requires accurate records, proper logbooks, and strict segregation between business and personal use.

This guide explains exactly how to track, calculate, and claim motor vehicle expenses, the difference between a motor vehicle and passenger vehicle, how capital cost allowance applies, what expenses qualify, and how partners deduct vehicle costs through Form T2125. Done correctly, this deduction can meaningfully reduce taxable income; done incorrectly, it can trigger a costly reassessment.

Legal and Regulatory Framework

Under the Income Tax Act, you may deduct motor vehicle expenses only when you use a vehicle to earn business or professional income. These expenses must be:

• Reasonable

• Supported by records

• Directly linked to income-earning activity

• Allocated between business and personal use

To claim the deduction, self-employed individuals and professionals complete Chart A — Motor Vehicle Expenses on Form T2125 (Statement of Business or Professional Activities).

Partners in a business partnership claim their vehicle expenses on:

• Line 9943 – Other amounts deductible from your share of net partnership income (loss),

• Reported in Part 5 of Form T2125.

Some vehicle costs must be deducted as capital cost allowance (CCA), while others are deducted as operating expenses.

The CRA also requires that mileage be documented through one of two acceptable methods:

• Full logbook

• Simplified logbook supported by a base-year log

Key Court Decisions

Canadian case law confirms that:

• Motor vehicle deductions require detailed records, not estimates

• Mileage logs are required to substantiate business use

• Personal driving cannot be claimed

• CRA is entitled to deny all or part of a claim if records are incomplete

• Vehicles used partially for business need proper allocation methods

• Capital cost allowance must follow statutory rules and cannot exceed prescribed limits

Courts have upheld CRA reassessments where taxpayers kept no logbook or claimed unrealistic business-use percentages. Judges consistently emphasize: if you cannot prove it, you cannot deduct it.

Why CRA Targets This Issue

CRA pays close attention to motor vehicle deductions because:

• They are often overstated

• Many taxpayers fail to keep logbooks

• Personal trips are frequently claimed as business

• Vehicles are large expenses with high audit impact

• Gig-economy drivers (Uber, Lyft, delivery apps) often lack proper records

• CCA on passenger vehicles is capped and frequently miscalculated

CRA compares claimed expenses with:

• Fuel purchases

• Kilometres driven

• Industry averages

• Business revenue

• Prior-year filings

If the business-use percentage is high with low revenues—or if records look incomplete—CRA may initiate a review.

Mackisen Strategy

Mackisen supports self-employed individuals, gig workers, professionals, and partnerships by:

• Setting up proper logbook systems

• Determining accurate business-use percentages

• Allocating expenses between business and personal mileage

• Identifying deductible vs. non-deductible costs

• Preparing Form T2125 and Chart A properly

• Advising on CCA and passenger vehicle limits

• Managing GST/QST input tax credits (when registered)

• Providing audit-ready documentation systems

We also help gig-economy workers reconstruct mileage and expenses when past logs were not maintained.

Real Client Experience

A contractor who used their truck for mixed business and personal use faced a CRA review. Mackisen reconstructed their logbook using appointment calendars, job sites, and fuel receipts. We validated the business-use percentage and preserved the majority of their deduction.

A real estate agent significantly overstated business kilometres. We recalculated a compliant percentage, claimed the correct expenses, and avoided penalties during the review.

A partner in a small construction partnership needed proper vehicle allocation for shared truck use. Mackisen separated partner-level expenses from partnership expenses and correctly reported them on line 9943.

A rideshare driver kept no mileage records. Mackisen created a base-year logbook and applied CRA’s simplified method to reconstruct their business use and preserve significant expenses.

Motor Vehicle Records: Full or Simplified Logbook

The CRA requires a logbook tracking business kilometres to determine the allowable percentage of expenses.

Full Logbook

Record every trip for a full year:

• Date

• Destination

• Purpose of trip

• Starting and ending odometer readings

This establishes your true business-use percentage.

Simplified Logbook

After keeping a full 12-month logbook for one year, you may use CRA’s simplified logbook method:

• Track a three-month sample logbook each year

• CRA allows you to extrapolate the annual business-use percentage from the sample

• Your business activities must remain consistent year to year

The simplified method still requires accurate records of total annual kilometres.

Type of Vehicle: Motor Vehicle, Automobile, Passenger Vehicle

The CRA distinguishes between:

• Motor vehicles

• Automobiles

• Passenger vehicles

These terms determine CCA rules, deduction limits, and GST/QST rules.

Automobile

Most cars and SUVs are “automobiles” and are subject to strict CCA limits and interest/lease restrictions.

Passenger Vehicle

A subset of automobiles used mainly for transporting people; subject to CCA Class 10.1 and cost limits.

Motor Vehicle

Trucks, vans, and certain vehicles used to transport goods, equipment, or for specific commercial purposes may not be subject to the same limits.

Choosing the correct category affects your maximum allowable deductions.

Motor Vehicle Expenses (Not Including CCA)

You may deduct the business portion of:

• Fuel & oil

• Repairs & maintenance

• Insurance

• Registration & licensing

• Parking fees for business use

• Leasing costs (subject to CRA caps)

• Interest on vehicle loans (subject to limits)

To calculate deductible expenses, you must allocate based on:

Business Kilometres ÷ Total Kilometres for the Year

This percentage is applied to all vehicle expenses except CCA, which has its own limits and rules.

Deductible Expenses: What You Can Claim

Fully or partially deductible expenses include:

• Gasoline or charging costs (for electric vehicles)

• Routine maintenance and repairs

• Winter tires, alignments, batteries

• Insurance premiums

• Business-related parking

• Vehicle loan interest (up to CRA maximums)

• Lease payments (subject to monthly maximums)

• Vehicle registration fees

• Tolls and road access charges

Non-deductible expenses include:

• Fines or traffic tickets

• Personal-use fuel or maintenance

• Commuting from home to a regular workplace

Only business use is deductible.

Chart A – Motor Vehicle Expenses (Form T2125)

To calculate allowable expenses, you must complete Chart A on Form T2125, which includes:

• Total kilometres driven

• Business kilometres driven

• Vehicle expenses by category

• Calculated business-use percentage

• Allocation of allowable expenses

• CCA (if applicable)

The CRA may ask to see your mileage log and receipts to verify these amounts.

Motor Vehicle Expenses for Partners (Line 9943)

If you are a partner in a business partnership and use your personal vehicle for business purposes, you may claim vehicle expenses on:

Line 9943 — Other amounts deductible from your share of net partnership income (loss)
(Part 5 of Form T2125)

Key rules:

• Expense claims must relate directly to partnership business

• Mileage logs are required

• Partnership may reimburse expenses, but this affects the deduction

• Expenses must not already be claimed by the partnership

Line 9943 is an important deduction for partners who incur significant driving for business operations.

Common Questions

Do I need a logbook?

Yes. CRA requires either a full or simplified logbook.

Can I claim a vehicle used for both business and personal use?

Yes, but only the business-use percentage.

Can I claim commuting?

No. Commuting to a regular workplace is personal.

Are gas receipts enough?

No. Receipts + logbook + annual odometer reading are required.

Can partners deduct vehicle expenses?

Yes, on line 9943 of Form T2125.

Can I deduct luxury vehicle costs?

Only up to CRA’s prescribed maximums for CCA, interest, and lease costs.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you’re filing your first GST/QST return or optimizing multi-year refunds, our expert team ensures precision, transparency, and protection from audit risk.

If you rely on a vehicle for your business or professional activities, Mackisen can help you calculate mileage, optimize deductions, prepare Form T2125 accurately, and maintain audit-ready documentation.