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How to Record a Proper AutoLog to Maximize Automobile Expense Deductions

img-20160906-wa0001I had an excellent week up north at a friend’s cottage. She recently bought a cottage so that her kids, raised in the city, could get to enjoy the outdoor and not be afraid of bugs and snakes and turtles. 🙂

I got to slack off for a week (sort of) and now I am back to work!

Although it was a fun week, taking care of two kids full time was a lot of work. (Hats off to those who are full time moms!)

I have the same amount of respect for those people who work full time with young children at daycare. How do they even manage to get their kids ready, go to work (sometimes even overtime), cook, do all the housework, and still be a mom/dad at the same time?

My friend, Joanne, is one of those.

img-20160906-wa0009She starts a regular day by getting her kids ready for daycare. She and her husband drop them off at the daycare and she takes the TTC to work downtown.

She doesn’t leave work until around 5 to 5:30pm and she takes the TTC home afterwards.

Once she gets home, she immediately starts cooking, feeds the kids and gets them ready for bed with her husband’s help.

She also started her real estate investing journey earlier this year. 🙂 The two properties were just closed a couple weeks ago.

img-20160906-wa0014The day she was supposed to come to the cottage to join us, she was dragged behind to work from home so that she could finish the month-end. She didn’t arrive until late in the evening.

And yet, she is still feeling guilty. Feeling guilty for not spending enough time with her kids, not being around enough to look after their homework and play with them.

We are always critical of ourselves. Our brain is wired to be critical and to think of the worst case scenario first.

She may think that she’s not good enough of a mom. I personally think that she is a superwoman, same as all the men and women who have to take care of the families, full time or part time.

On to this week’s topic –

img-20160906-wa0015In one of my previous blog posts, I discussed how you can deduct automobile expenses against your rental properties.

Whether you are a real estate investor, realtor, work in sales or own your own business, you want to make sure you keep a proper autolog to keep track of your mileage.

This helps you support the automobile expense claim against the income you are earning.

To keep a full logbook, this means that you are required to keep the following information in your logbook:

  • Date
  • Destination
  • Reason for trip
  • Distance travelled

I have taken the honour to create a sample for your reference.

Date Destination Reason for trip KM driven
1/1/16 Beginning odometer reading 25,786km
1/6/16 Home Depot Pick up supplies for rental property 39km
1/7/16 Unit A, 1st Student Rd., Hamilton Drop off supplies 82km
1/8/16 Unit A, 1st Student Rd., Hamilton Showings for potential tenants 82km
 
 
 
12/28/16 3rd Student Rd, Hamilton Collect rent 78km
12/31/16 Ending odometer reading 38,172km

 

At the end of the year, you sum up the business use mileage, say 10,786km.

Business use % = 10,786km / (38,172km – 25,786km) = 87%

Therefore, 87% of your automobile expenses are deductible.

Yes, this is a big hassle to keep every single trip. The more you claim, the more documentation you are expected to keep.

And it doesn’t end here with the log book.

Other evidence including the following information are expected to be kept to substantiate the reasonability of your logbook:

  • Maintenance record/invoice that shows the odometer reading on your vehicle
  • Daily planner that shows addresses that you have visited
  • Receipts that shows the date and purchase (such as Home Depot receipts, etc.)

And yes, your logbook would also need to be consistent with all other circumstantial evidence.

It’s a lot of work to set it up right, but once you set it up right and there is no substantial change in your business usage, you may be able to keep a smaller logbook in the subsequent years.

Until next time, happy Canadian Real Estate Investing.

Cherry Chan, CPA, CA

Your Real Estate

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.
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