How to Deduct Vehicle Expenses for Your Business in Canada and Quebec

Whether you run a corporation or operate as a sole proprietor, if you use a vehicle for business purposes, you're entitled to claim related expenses. But there’s more than one way to do it. This article outlines your two main options: the detailed method and the simplified (per-kilometre) method, and how to stay compliant with both the CRA and Revenu Québec.

Option 1: Detailed Method (Actual Costs)

This method allows you to deduct the actual costs of using your vehicle for business. These include:

• Fuel and oil
• Maintenance and repairs
• Insurance premiums
• Vehicle registration and license fees
• Lease payments or depreciation (capital cost allowance)
• Parking and tolls (related to business use only)

You must also track both:

• Total kilometers driven in the year
• Kilometers driven specifically for business

Your deductible portion is based on the business-use percentage. For example, if you drove 20,000 km and 8,000 km were for business, you can claim 40% of eligible vehicle expenses.

Option 2: Simplified Method (Per-Kilometre Rate)

Under the simplified method, you multiply your business kilometers by a flat rate set annually by the government. You don’t need to keep receipts for gas or repairs—just accurate mileage logs.

For 2024, the CRA standard rate is:

• CRA: $0.68/km for the first 5,000 km and $0.62/km after that (source)
• Revenu Québec: $0.59/km for the first 8,000 km and $0.53/km after that (source)

Which Method Should You Use?

If you drive a lot for work and have high vehicle expenses (e.g., fuel, repairs, lease), the detailed method often gives a larger deduction. But if you prefer simplicity and have modest driving costs, the per-kilometre method may be easier to manage.

Tips to Stay Compliant

• Maintain a mileage log or app to record each trip (with date, destination, purpose, and km).
• Keep receipts for all vehicle-related expenses if using the detailed method.
• Use separate credit cards or bank accounts to keep records clean (if possible).

Still not sure which method is right for your business? Contact Fractional Accounting for tailored advice and year-round support.