Tax Information – Vehicle Write offs

One of the biggest concerns that those in direct sales have is what all can they write off at tax time. The simple answer is lots of stuff!  But I know that is not the most helpful answer.  This article is going to focus on your vehicle and what you can write off and how to keep track of it.    Please keep in mind that I am not a tax accountant and I live in Canada, so the rules where you are may be different.  Talk to your favourite tax person to check the specific rules.

Mileage– The best thing you can do is keep track of the mileage that you use your vehicle for.  I like to keep a notebook in my car alone with a pencil (pens freeze in winter) to keep track of this.  It is really quite simple, create the following categories and fill them in each time.

English: Volvo highest mileage car approaching...

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Date   Starting Mileage   Ending Mileage    Task

So for instance, I would write down “Christine Party” or “Parcel pickup” or whatever works for you.  If you are doing errands, and some are business related and some aren’t, then you can estimate the ending mileage either from prior trips or what you think it is.  No one is likely going to come to your house and drive the route to verify it.  If I am going out of town, I will put down something like “Christine Party – Town name” so I remember why the mileage is that much higher.

At the end of the year, I use a spreadsheet to calculate my mileage for me.  The only difference between my note book and this spreadsheet is that it has a column to calculate how far i drove.

Date    Starting Mileage   Ending Mileage   Distance Travelled   Task

Don’t forget, on January 1, write down what your mileage is as you are going to use that for starting mileage for the year and as the ending mileage for hte prior year.

Now, you may be wondering what to do with all this wonderful data.  You are then going to use it to determine how much of your car expenses you are able to write off.

With the data we collected above, we know the following:

January 1 Mileage   103,000

Dec 31 Mileage   110,500

Mileage for business   3,000

Percentage used for business   40%   (3,000/7,500)

So you can write off 40% of your vehicle expenses for the year.

Another option that you may have through your taxes is to claim a flat fee per kilometre/mile that you drove.  Depending on how much you put into your vehicle in the year that may be the better way to go.

Vehicle Expenses

Basically, anything that you have put into your vehicle during the year is going to qualify for a write off, with a few possible exceptions.

You can write off

  • Gas
  • Repairs
  • Insurance

But, as in the example above, you can only write off 40% of these.

Hopefully this has helped to clear up some information about using your car as part of your direct sales business.  If you have a question related to this, please post it in the comments and I will reply.


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