27,000 divided by 30,000, multiplied by $7,000, equals $6,300. That is the Canada Revenue Agency's own worked example for a business truck: 27,000 kilometres driven to earn income out of 30,000 total kilometres, applied to $7,000 of vehicle costs, produces a $6,300 deduction (s1). Every number in that calculation depends on one record — the logbook — and December 31 is the last day the record for this year can be completed honestly. The odometer reading at the end of the fiscal period is part of the record itself (s2). Miss it, and next spring's calculation starts from a guess.
The December close, step by step
- Photograph the odometer on the last day of the fiscal period. The record required for each vehicle includes the odometer reading at the start and end of the fiscal period (s2). A dated photo is the simplest way to fix that number before January driving blurs it.
- Close the logbook for the year. For each business trip the log lists the date, destination, purpose, and number of kilometres driven (s2). Work through December's trips while calendars and receipts still match them. Fill gaps only from records you can point to — a calendar entry, a fuel receipt, a delivery note — and leave a genuine unknown marked as unknown rather than reconstructed as fact.
- Total both kilometre figures. The claim needs two numbers per vehicle: total kilometres driven, and kilometres driven to earn business income (s2). Subtract nothing and estimate nothing at this stage; the two totals are the calculation.
- Reconcile the totals against the odometer. Total kilometres in the log should agree with the difference between the year-end and year-start odometer readings. A material gap means trips are missing from the log or a vehicle change was not recorded — if a vehicle was changed during the period, the record needs the dates of the change and the odometer reading when the vehicle was bought, sold, or traded (s2).
- Run each vehicle separately. A business using more than one vehicle keeps a separate record for each one, showing total and business kilometres and the cost to run and maintain that vehicle, and calculates each vehicle's expenses separately (s2). One blended percentage across two vehicles is not the method.
- Apply the percentage to that vehicle's costs. Only the portion of expenses relating to earning business income is deductible, and expenses must be reasonable and supported by receipts (s1, s2). Parking fees related to business activities and supplementary business insurance are treated differently: the full amount of those can be deducted (s1).
What success looks like: for each vehicle there is a year-start and year-end odometer reading, a closed log whose totals reconcile to those readings, a business-use percentage computed from the two totals, and a receipt file that matches the costs the percentage was applied to.
Check the math on one vehicle before filing season
Use the CRA example as the template, with your own totals in its places. In the example, the $7,000 of costs comprised gasoline and oil of $3,500, repairs and maintenance of $500, insurance of $1,000, loan interest of $1,900, and licence and registration fees of $100, and the business share — 27,000 of 30,000 kilometres, or 90% — applied to the whole $7,000 produced the $6,300 result (s1). For a sole proprietor with business or professional income, that amount is deducted on line 9281 of Form T2125 (s1).
| Input | CRA example (s1) | Your December figure |
|---|---|---|
| Business kilometres | 27,000 | From the closed log |
| Total kilometres | 30,000 | Odometer difference, reconciled |
| Total vehicle costs | $7,000 | Receipts for this vehicle only |
| Deductible amount | $6,300 | Business km ÷ total km × costs |
The table is the decision framework as much as the arithmetic: if any cell in the right-hand column cannot be filled from a record, that cell — not the whole return — is the problem to fix in January, while supporting records can still be gathered honestly.
Decide next year's logbook method in December, not March
The year-end totals also decide how next year gets logged. The default is a full logbook: an accurate logbook of business travel maintained for the entire year is the best evidence to support vehicle use (s2). There is a sanctioned shortcut, but it has entry conditions. A business can keep a full logbook for one complete year to establish a base year, then use a three-month sample logbook in a later year, as long as usage stays within the same range — within 10% — of the base-year results, and the business can show the base year remains representative of normal use (s2).
The later-year percentage is not simply the sample percentage. It is calculated as the sample-period percentage divided by the base-year percentage for the same period, multiplied by the base year's annual percentage (s2). In the CRA's example, a sample of 51% against 46% for the same months in the base year, multiplied by the base year's annual 49%, gives a calculated annual business use of about 54%, which the CRA would accept in the absence of contradictory evidence because it sits within 10% of the base year (s2).
The failure mode matters as much as the formula. Where calculated annual use rises or falls by more than 10%, the base year is not an appropriate indicator for that year: the sample is reliable only for the three months it covers, the rest of the year needs an actual record of travel or alternative records, and the business should consider establishing a new base year with a fresh 12-month logbook (s2). December is when that call is cheapest. If this year's pattern changed materially — a new delivery route, a lost contract, a second vehicle — plan a full logbook for next year instead of discovering in the following December that the sample cannot carry the claim.
File the records properly at the close. Records and supporting documents are generally kept for six years from the end of the tax year they relate to, and the full 12-month base-year logbook must be kept for six years from the end of the tax year for which it is last used to establish business use (s2). A base-year logbook therefore outlives the ordinary file: label it with the years it supports before it goes into storage.
— Sterling Cole, Money Writer — Earning Desk