Business Owners... Claim Your Travel Cost As An Expense!

It generally costs money to make money. There are a lot of expenses involved in running a business, and most of them can be related to travel. The silver lining here is that is if you’re a self-employed business owner, you can deduct the motor vehicle expenses you paid out in order to bring income in.

The travel expenses you can claim are not restricted to gasoline. As long as they’re related to your business, you can deduct:

  • licence and registration fees

  • fuel costs

  • insurance

  • interest on money borrowed to buy a vehicle

  • maintenance and repairs

  • leasing costs

  • parking fees

You’ll potentially save thousands when you claim everything on this list. However there are a couple of steps you should take, if you want to maximize your savings.

The first thing you need to do is establish a travel log. The purpose of this log is to keep a record of the total kilometres you drive on your personal time, and the kilometres you drive to earn income. This helps separate the kilometres and costs associated with travel for business purposes, versus personal kilometres (that you cannot claim as an expense). Your travel log supports the amount you can deduct of each of the expenses you have listed. These kinds of records are really important, especially if there’s an audit. You must be able to back-up your claim with solid evidence to avoid penalty.

Kilometres are not the only things you should include in your log in order to support your deduction. The best way to create an accurate logbook is to keep track of as much relevant information as you can. For each business trip, the Canada Revenue Agency recommends that you keep a record of:

  • date

  • destination

  • purpose

  • number of kilometres driven

To make things easier, many people create a spreadsheet using these headings and just fill it in trip-by-trip. However you choose to do it, keeping a record of your motor vehicle expenses when you travel for business will pay off. Here is a great example provided on the Canada Revenue Agency website, which really “drives” home just how much you might be able to claim each year for business-related travel cost:

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/t2125/chrt_-eng.html

In short, you can see by Danielle’s hypothetical claim of $5,000 dollars, it’s definitely worth your while to keep track of all business-related vehicular activity. Just make sure you record the odometer reading of each vehicle at the start and end of your fiscal year. You can even change motor vehicles during the fiscal period; all you need to do is record the dates of these changes, the odometer reading when you buy, sell or trade the vehicle, and continue to maintain your travel log as usual.

The basic rule here is that if you can support it, then you can claim a percentage of it. Once you've establish a routine for keeping your log up to date, you’ll have your finger on the pulse of exactly what you spend on travel; and most importantly, lining your pockets with a few extra dollars each year, will feel practically effortless.

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