If you use your vehicle strictly for your business, you can deduct 100% of your vehicle expenses. However, in many cases, the vehicle is used for business and personal use. In this case, you can only deduct the part of the expenses related to your business.
The formula to calculate the business portion of vehicle expense:
Business kilometers / Total kilometer x Total expenses
Here is an example:
Kilometers driven to earn business income …. 24,000
Total kilometers driven during the year ……… 30,000
Gas and oil …………………………………… $2,500
Insurance …………………………………….. $2,000
Interest …………………………………………$ 400
License and registration fees ……………$ 75
Maintenance and repairs …………………$ 325
Total expenses …………………………… $5,300
The business part of expenses is calculated as:
24,000/30,000 x $5,300 = $4,240
Business parking …………. $100
Supplementary business insurance ….. $300
You can deduct 100% of parking fees related to your business activities and supplementary business insurance for your motor vehicle. So total deductible business vehicle expenses are $4,240 + $100 + $300 = $4,640. You can claim this amount on line 9281 of Form T2125.