How to Write Off Your Car As a Business Expense in Canada

Suppose you're an incorporated small business owner or part of a growing finance team in Canada. You're probably using your personal vehicle for work, whether that means driving to client meetings, making deliveries, or picking up supplies.

But, did you know you can write off a portion of your vehicle expenses to reduce taxable income and lower your overall tax bill? 

However, to do it right, you need to maintain bulletproof records, understand exactly which expenses qualify, and follow the Canada Revenue Agency's (CRA) guidelines.

So, why does this matter for your business? Other than direct tax savings, you gain organized expense tracking that keeps your books in order, and best of all, reduced taxes that put more working capital back into your operations.

What Does it Mean to Write Off a Car as a Business Expense in Canada?

A business deduction is an expense that can be subtracted from your income for tax purposes. In the case of vehicles, this means deducting the business-use portion of your car expenses, like fuel costs, maintenance, or insurance, if the car is used for business-related travel.

Let's say your team frequently drives for site visits, meetings, or deliveries; then your vehicle may qualify as a business-use asset. Keep in mind, though, that personal use isn't deductible, and only the business-use percentage of expenses can be claimed. 

Tracking these costs accurately is easiest when integrated with small business accounting software fit for Canadian businesses, especially platforms that centralize expense categories like fuel, insurance, and maintenance.

What Expenses Can Be Written Off?

Based on CRA guidelines, below are the typical vehicle expenses you may be able to claim for Canadian taxes:

• Depreciation (Capital Cost Allowance or CCA): A portion of your vehicle's value can be claimed over time.
• Fuel costs: Gas, diesel, or even electricity if you drive an EV.
• Insurance: The prorated amount based on business use.
• Repairs and maintenance: Oil changes, tire replacements, and other upkeep.
• Leasing costs (if leased): Monthly payments are deductible up to CRA limits.
• Loan interest (if owned): Interest on financing may be deducted to a certain cap.

The business-use percentage determines the portion of each expense that is deductible. 

How to Write Off Your Car As a Business Expense: Important Steps

Writing off your car is not automatic. You need to follow the right steps to comply with CRA guidelines and back up your claim with proper documentation.

Step 1: Track the Mileage

The CRA requires you to maintain a logbook or mileage tracking system to prove how much of your driving is business-related.

Your log should include:

• Date and destination of each trip
• Purpose of the trip
• Distance driven

For business owners in Canada, free mileage tracker apps like MileIQ, TripLog, or Venn-integrated apps can help automate this process, ensuring audit-ready documentation. Many of these apps also feature a gas mileage reimbursement calculator to help you determine the exact amount you can claim for business-related vehicle expenses.

‍
Important: Commuting from home to a regular office is not considered business use.

Step 2: Understand Eligible Car Expenses

As covered earlier, eligible expenses include:

• Fuel
• Vehicle maintenance
• Insurance
• Depreciation (CCA)
• Repairs
• Leasing or loan interest

Always separate any personal costs and only deduct expenses directly tied to work-related driving.

Step 3: Calculate the Business-Use Percentage

To calculate the business use percentage of your vehicle, use this formula:

(Business Kilometres    ÷   Total Kilometres)    ×   100   =   Business-Use %

For example, if you drove your truck 27,000 kilometres for business out of the total 30,000 kilometres driven, it means your business-use percentage is 90%. Now, if you want to determine how much of your expenses you can write off, here’s how: 

(Business-Use Percentage)  ×  Total Vehicle Expenses  =  Total Deduction

Let’s say your total vehicle expenses (gas, insurance, interest, and maintenance) amounted to $5,400. Just multiply the business-use percentage (90%) by the total vehicle expenses to determine your total deductible amount.

So, in this case, the total deductible amount for the tax year is $4,860.

Step 4: File the Claim 

‍
Depending on your employment structure, you'll report vehicle expenses differently:

• For self-employed individuals: File a T2125 (Statement of Business or Professional Activities).
• For employees: Use Form T777, but only if your employer requires you to use your vehicle for work and provides a signed T2200 form.

Also, make sure to include:

• Your mileage logbook
• Receipts for insurance, gas, repairs, etc.
• Breakdown of your business-use percentage

Keep everything for at least six years in case of a CRA review. Accurate documentation helps you avoid disallowed claims or audits.

‍

Eligibility Criteria for Writing Off Your Car as a Business Expense

Understanding the boundaries between personal and business use is crucial for small businesses and freelancers.

• Business Use vs. Personal Use
  The CRA sets clear guidelines for what counts as business use and what doesn’t.
  
  • Business use (Deductible): Client meetings, job site visits, deliveries or pickups, or trips to temporary work locations
  • Personal use (Non-Deductible): Commuting, running errands, personal travel
    
    
• How to Track Business Use
  
  • Keep a detailed logbook or use a digital mileage app to record business trips, documenting the date, destination, purpose, and distance travelled.
  • Business activities may include meetings, site visits, deliveries, or travel to temporary work locations (not a regular workplace).
  • Calculate the percentage of business use by dividing business kilometres by total kilometres driven.

The Different Methods for Writing Off Your Car in Canada

How you write off your car depends on whether you own or lease the vehicle. But there are two main approaches.

Capital Cost Allowance (CCA)

If you own the vehicle, you can claim depreciation for business purposes using CRA’s CCA system. 

• Most passenger vehicles fall under Class 10 or 10.1 (30% CCA rate)
• Only 50% of the CCA rate can be claimed in the first year (half-year rule)
• Apply your business-use percentage to the annual CCA amount

Operating Expenses Deduction

Operating expenses can add up quickly, especially if you use your car heavily throughout the year. Track your operating costs carefully and apply your business-use percentage to determine the deductible amount.

• Fuel
• Maintenance
• Insurance
• Registration fees
• Parking
• Repair expenses

Store all receipts, as the CRA requires proof of every claimed expense to file with them successfully.

Leasing vs. Owning

If your business leases the vehicle:

• You can deduct the business-use portion of lease payments
• CRA caps lease deductions at $1,100 per month (before tax) for leases entered into in 2025.

If you own the vehicle:

• Use the CCA method to deduct depreciation
• You may also deduct loan interest (up to $350/month, per CRA limits)

Which method is better? Leasing is simpler, but owning may offer greater long-term value, especially if your vehicle is a key business asset.

How to Track & Manage Your Business Vehicle Expenses with Venn

Managing vehicle expenses often means chasing down receipts, manually logging mileage, and scrambling at tax time. This is extremely time-consuming and error-prone, especially when you're juggling multiple accounts, vendors, and receipts. 

Venn eliminates that hassle by centralizing and automating your expense tracking. Venn’s expense management platform allows business owners to:

• Capture receipts on the go and tag them by project or team
• Automatically categorize vehicle expenses (fuel, repairs, insurance)
• Sync with QuickBooks and Xero for accurate, real-time reconciliation
• Generate clean, transaction-level reports for accounting and audits

Although for complex scenarios, like partial vehicle use, multiple vehicles, or high-value cars, it's smart to consult a tax professional who understands the nuances of Canadian taxes.

Key Takeaways:

• Track business use accurately: Use a logbook or app to determine your business-use percentage for vehicle expenses.

• Only claim eligible expenses: Fuel, repairs, insurance, depreciation, and lease payments must be tied to business use.

• Use tools like Venn: Automate expense tracking, reduce manual errors, and stay compliant with CRA rules to maximize deductions.

Stay on Top of Vehicle Expenses with Venn

Tracking vehicle costs across fuel, repairs, insurance, and team use can get messy, especially when you’re managing multiple accounts or currencies. 

Venn brings all your business spending into one platform, so you can categorize transactions in real time, automate reconciliations, and tag expenses by project or team. Whether you're preparing for tax season or optimizing monthly reporting, Venn helps you move faster, with full visibility and audit-ready documentation.

See how Venn makes business expense tracking effortless

Frequently Asked Questions (FAQs)

Q: Can I write off a car I lease for business purposes?

Yes, but only the business-use portion. The CRA sets a monthly deduction limit for leased vehicles ($1,100/month).

Q: What if I use my personal vehicle for business?

Personal vehicles used for business can be written off based on the business-use percentage. Keep detailed mileage logs to support your claim.

Q: How do I deal with high-value vehicles?

The CCA cap for high-value passenger vehicles (Class 10.1) rises from $37,000 to $38,000 (before tax) if purchased on or after January 1, 2025. The CRA puts these restrictions in place to ensure fairness across taxpayers.

Q: Are there any limitations on the amount I can deduct for my car?

Yes, Canada has several key limitations on car deductions. For expensive vehicles, depreciation is capped at $38,000 (2025), lease payments at $1,100/month, and loan interest at $350/month, regardless of actual costs. 

Q: How do I determine the percentage of my car's use that is for business purposes?

Track business kilometres using a logbook or app, recording date, destination, purpose, and distance for each trip. To calculate the percentage, use the formula below:

(Business km ÷ Total km) × 100 = Business-Use %

‍