I received some questions with regards to "Automobile Log". Today, I will talk a liitle bit more about it.
The use of an automobile log provides one of the safest ways to substantiate and keep track of all
your automobile expenses incurred that are deductible for income tax purposes and the kilometres driven on income-earning activities. The type of expenses to keep track of can be broken down into two categories. They are operating and fixed expenses.
Operating Expenses
The types of operating expenses related to an automobile include gasoline, maintenance and repairs (such as oil changes and car washes), insurance, license and registration fees. Such expenses may vary in relation to the amount of kilometres driven.
Fixed Expenses
Fixed expenses differ from operating expenses in that they relate to the automobile itself as opposed to the amount of kilometres driven. When an automobile is purchased,
they would relate to the capital cost allowance and interest expense when financed. In the
case of a leased automobile, such expenses would include the lease payments. It is important to note that there are special rules and restrictions which limit the portion of actual costs that can be included in your total expenses. You can consult with your accountant to obtain more information on what these special rules and limitations are.
Deductible Expenses
Because your automobile will most likely be utilized for both business and personal reasons, it is essential that the total automobile expenses be allocated between these two uses on a reasonable basis in order to arrive at only the deductible portion for income tax purposes. The best method to achieve this will involve the distance traveled calculated by taking total kilometres driven for business purposes divided by total kilometres driven for both business and personal
purposes.
Certain expenses such as parking expenses incurred while on a business trip and car repairs made as a result of an accident while on a business trip do not have to be prorated. However, such expenses incurred resulting from a personal trip made are not deductible.
