Year-End Vehicle Checklist for the Self-Employed

Most people treat the vehicle part of their return as something that happens in April, when the numbers are typed in. It is not. The claim is decided on the last day of your fiscal year, because that is the last day you can still collect the evidence it rests on cheaply.

An odometer reading taken on December 31 is a fact. The same reading reconstructed the following April is an estimate, and an estimate is the thing a reviewer asks you to support. The same goes for the log you meant to finish and the fuel receipts in the glovebox.

This page is the list: what to do, why the CRA needs it, and where each topic is covered in full, then a table mapping every document to the part of the claim it supports.

When your year actually ends

For an individual, a business's fiscal period cannot end after the end of the calendar year it began in, under subsection 249.1(1) of the Income Tax Act, unless you have elected an off-calendar fiscal period under subsection 249.1(4). So for most sole proprietors the date that matters is December 31. If you have made that election, read every "December 31" below as your own fiscal year-end.

The same subsection binds a partnership that has an individual as a member, so partners are usually on December 31 too. The checklist is the same either way.

Why the claim is built this way

A sole proprietor or partner claims actual vehicle costs multiplied by the business-use percentage on the T2125. The percentage is business kilometres divided by total kilometres for the fiscal period. The CRA's per-kilometre rate is not part of this. It is the ceiling on an allowance one person pays another for the use of that other person's car (Income Tax Regulations section 7306), and nobody pays a sole proprietor an allowance for driving their own business. If you want the long version, the mileage-rate post works one year of driving both ways.

That formula has two halves, and every item below feeds one of them. The kilometres give you the percentage. The receipts and statements give you the costs.

The checklist

1. Read the closing odometer of every vehicle

The CRA's motor vehicle records page asks you to record the odometer reading of each vehicle at the start and end of the fiscal period. The closing reading is the denominator of your percentage: it minus the opening reading is your total kilometres, and your total kilometres are what the business kilometres are divided by.

Take it on the last day of the year. Photograph the dashboard and write the number and the date in the log itself. That reading is also the opening reading for the next year, so one photo does two jobs.

If you use more than one vehicle for the business, you need a reading for each, because the CRA asks for a separate record per vehicle with its own total and business kilometres. How to take and keep the readings is covered in odometer readings at the start and end of the year, and the per-vehicle arithmetic in two vehicles used for business.

2. Close the log and compute the percentage

Go through the year's log before you close it. Every business trip needs four things: the date, the destination, the purpose and the kilometres. A trip with a blank purpose is a distance, not a business trip, and the time to fill it in is while you remember the client. The full field list is in the logbook requirements guide.

While you are there, check the trips that most often get mislabelled. The drive between your home and a regular place of business is personal unless your home is the base of the business, and because it is the trip you make most often, one wrong label repeats all year. Commuting versus business driving sets out the CRA's test, and what counts as a business trip sorts the rest.

Then divide. Business kilometres over total kilometres, per vehicle, for the fiscal period. If this was a sample year under the simplified logbook, the figure you claim is not the sample percentage but the calculated annual business use, and it has to pass the ten-point test against your base year. How to compute the percentage properly, including a year with gaps, is in calculating your business-use percentage.

If the log has holes you cannot fill from memory, deal with them now rather than in April. Reconstructing a lost mileage log covers what the CRA will and will not accept.

3. Gather fuel, maintenance and repair receipts

The CRA's records page is direct about it: you can deduct motor vehicle expenses only when they are reasonable and you have receipts to support them. The deductible running costs the CRA lists for line 9281 of the T2125 are licence and registration fees, fuel and oil, electricity for a zero-emission vehicle, insurance, interest on money borrowed to buy the vehicle, maintenance and repairs, and leasing costs.

Fuel is the one that goes missing. Match the year's fuel receipts against your card statements now: a statement line shows you paid a gas station, the receipt shows what you bought. If you charge an electric vehicle at home, the cost is harder to isolate, and electric vehicles used for business covers what to keep.

Parking, tolls and fines are not in the CRA's list above and have their own treatment. Parking, tolls and tickets covers them.

4. Pull the loan or lease statement for the full year

If you financed the car, download the lender's annual statement or the twelve monthly statements. The deductible amount is the interest, not the principal repayment: the principal is part of what you paid for the car and comes back through capital cost allowance instead.

The interest on a passenger vehicle is also capped. Section 67.2 of the Income Tax Act limits the deductible interest to a prescribed amount for each 30 days of the period the interest covers, and Regulation 7307(2) sets that amount at $350 per 30 days for a car acquired after 2023 (and $300 per 30 days for one acquired after 2000 and before 2024). A statement that shows the interest by period is what lets you apply the cap correctly. The detail is in car loan interest deductions.

If you lease, pull every payment for the year and the lease agreement itself. Deductible lease costs on a passenger vehicle are limited by section 67.3 of the Act. The deduction is the lesser of two formulas. The first allows a prescribed amount for each 30 days of the lease term, set by Regulation 7307(3) at $1,100 plus the sales tax on that amount for a lease entered into after 2024, and $1,050 plus tax for one entered into in 2024. The second scales the year's lease charges by the manufacturer's list price. Both also adjust for any refundable deposit over $1,000 and any reimbursements, which is why you need the agreement and not only the payments. Leased vehicle expenses works both tests.

Whether a vehicle is a passenger vehicle at all (and so subject to these caps) depends on the vehicle, not on how you use it. A pickup or a van can fall outside the definition. See pickup trucks, vans and the passenger-vehicle test.

5. File the insurance and registration documents

Insurance and licence and registration fees are both on the CRA's list of deductible vehicle costs, and neither shows up on a fuel receipt or a loan statement, which makes them easy to forget. Keep the policy declaration or renewal notice, and the registration renewal receipt.

They also name the vehicle and the period covered, which ties the costs you claim to the car your log describes.

6. If you bought or sold a car during the year

A change of vehicle is the item with the most rules attached, so it is worth taking in parts.

Record the changeover. The CRA's records page asks that, if you change motor vehicles during the fiscal period, you record the dates of the changes and the odometer reading when you buy, sell or trade the vehicle. Each car then has its own start and end readings for the part of the year you had it.

The ceiling belongs to the year you acquired the car. Paragraph 13(7)(g) of the Act deems the capital cost of a passenger vehicle that cost more than the prescribed amount to be that amount. Regulation 7307(1) sets it by acquisition date, plus the sales tax that would have been payable on it: $37,000 for a car acquired in 2024 and $38,000 for one acquired in 2025. The Department of Finance announced $39,000 for passenger vehicles acquired on or after January 1, 2026. That amount stays with the car for as long as you own it, whatever year you are filing. A passenger vehicle that cost more than its ceiling goes in Class 10.1 (Schedule II to the Regulations), and Regulation 1101(1af) makes each Class 10.1 vehicle its own separate class.

The first-year rule for a car you bought. Regulation 1100(2) normally puts only half of a year's net addition into the first-year calculation, which is the half-year rule. It does not apply to property that is reaccelerated investment incentive property, which Regulation 1104(4.01) defines as property acquired after 2024 that becomes available for use before 2034 and that meets one of two conditions (broadly, nobody has claimed capital cost allowance on it before, or it was not previously owned by you or a person you do not deal with at arm's length). For such a car that becomes available for use before 2030, Regulation 1100(2) adds a factor of one half instead, so the first-year deduction is computed on one and a half times the addition. For one that becomes available for use in 2030 through 2033, the factor is nil and the addition goes in whole. How that plays out across classes is in the CCA guide.

The year you sell a Class 10.1 car. Regulation 1100(2.5) says that if you dispose of a Class 10.1 vehicle you owned at the end of the previous year, you still claim capital cost allowance on it for the year of sale, computed as if you had not disposed of it but on half the number of days in the year, and nothing in any later year. Subsection 13(2) of the Act keeps recapture on a Class 10.1 car out of income, and paragraph 20(16.1)(a) denies it a terminal loss. Keep the bill of sale or the trade-in paperwork, because the date on it is what those rules turn on.

7. Decide the base year, and store the year's records

If the year you are closing had a complete twelve-month log, decide whether it will be your base year for the simplified logbook. After one complete year, the CRA lets you keep a three-month sample log in later years and project the annual figure from it, as long as the base year remains representative of the vehicle's normal use and the projection stays within ten points of the base year's annual business use. A year that was unusual (a long contract out of town, a move, a new line of work) is a poor base year even with a perfect log. The base-year rule works the formula and the test.

Then store the year. Section 230(4)(b) of the Act requires records to be kept until six years from the end of the last taxation year they relate to, and subsection 230(4.1) requires electronic records to be kept in an electronically readable format for that period. The base-year log is the exception that catches people: the CRA says the full twelve-month logbook must be kept for six years from the end of the tax year for which it is last used to establish business use. A log you lean on for four later sample years is kept for six years after the last of them.

Claimable Drive, in beta for iPhone, records drives in the background, lets you swipe each one business or personal, works out the business-use percentage from those swipes and keeps your car's odometer readings, and the logbook and its export are free.

Worked example: closing one vehicle's year

These are stated inputs, not averages. A sole proprietor with one car, bought in 2025 and financed with a loan that was outstanding for all 365 days of the year being closed, and a fiscal year ending December 31.

Item	Figure
Opening odometer (January 1)	42,310 km
Closing odometer (December 31)	60,310 km
Total kilometres	18,000 km
Business kilometres from the closed log	12,600 km
Business-use percentage	12,600 ÷ 18,000 = 70%

Now the costs, from the documents gathered in items 3 to 5.

Cost	Amount	Document
Fuel	$3,200.00	Fuel receipts
Insurance	$1,900.00	Policy declaration
Licence and registration	$120.00	Registration renewal
Maintenance and repairs	$850.00	Shop invoices
Loan interest	$2,400.00	Lender's annual statement
Total running costs	$8,470.00
Business portion at 70%	$5,929.00

Check the interest against the cap before you multiply. The car was acquired after 2023, so the prescribed amount is $350 per 30 days. Over 365 days that is $350 ÷ 30 × 365 = $4,258.33. The $2,400.00 actually paid is below it, so the whole amount goes in.

Capital cost allowance is not in this table. The CRA's deductible-expenses page directs it to its own line on the T2125, and item 6 above covers the first-year and disposal rules that decide it.

What each document supports

Document	What it supports	Checklist item
Opening and closing odometer readings, per vehicle	Total kilometres, the denominator of the percentage	1
Odometer readings on the date of a purchase, sale or trade	Each vehicle's kilometres for the part of the year you had it	1, 6
The mileage log (date, destination, purpose, kilometres)	Business kilometres, the numerator of the percentage	2
Fuel and oil receipts, or charging records	Fuel cost	3
Maintenance and repair invoices	Maintenance and repair cost	3
Loan statements showing interest by period	Deductible interest, and the per-30-day cap	4
Lease agreement and every lease payment	Deductible lease cost, and both lease tests	4
Insurance policy declaration or renewal	Insurance cost, and which vehicle it covers	5
Licence and registration receipt	Registration cost, and which vehicle it covers	5
Bill of sale, purchase agreement or trade-in paperwork	Acquisition date (the ceiling year and the first-year rule), capital cost, and the disposal year	6
The base-year log	Every later year that projects from a sample	7

FAQ

What if I forgot to take the odometer reading on December 31? Take it as soon as you can, and note the date and every trip since the year ended so the December 31 figure can be worked back from it. The CRA asks for the reading at the start and end of the fiscal period, so the closer your reading is to that date, the less of it is arithmetic. The longer you wait, the more it becomes a reconstruction.

Do I need a separate log and separate receipts for each car? Yes. The CRA asks for a separate record for each vehicle used in the business, showing the total and business kilometres and the cost to run and maintain it, and says to calculate each vehicle's expenses separately.

Can I claim the loan payments on my car? Only the interest part, and only up to the cap for a passenger vehicle: $350 per 30 days for a car acquired after 2023. The principal is part of the car's cost and comes back through capital cost allowance.

I sold my car during the year. Can I still claim capital cost allowance on it? For a Class 10.1 car you owned at the end of the previous year, yes: Regulation 1100(2.5) allows the year-of-sale claim as if you still owned it, on half the days in the year, and nothing after. There is no recapture and no terminal loss on a Class 10.1 car.

Sources

1. CRA, Motor vehicle records, logbook fields, odometer readings, receipts, one record per vehicle, the simplified logbook and base-year retention.
2. CRA, Motor vehicle expenses: deductible expenses, the deductible running costs.
3. Income Tax Act, section 249.1, the fiscal period of an individual's business.
4. Income Tax Act, section 67.2, the per-30-day limit on interest for a passenger vehicle.
5. Income Tax Act, section 67.3, the two formulas that limit lease costs for a passenger vehicle.
6. Income Tax Regulations, section 7307, the prescribed capital cost ceiling by acquisition date, the interest amount and the lease amount.
7. Department of Finance Canada, Government Announces the 2026 Automobile Deduction Limits and Expense Benefit Rates for Businesses, January 14, 2026, the $39,000 ceiling for passenger vehicles acquired on or after January 1, 2026.
8. Income Tax Act, section 13, paragraph 13(7)(g) (the deemed capital cost of a passenger vehicle) and subsection 13(2) (no recapture on a Class 10.1 vehicle).
9. Income Tax Act, section 20, paragraph 20(16.1)(a), no terminal loss on a Class 10.1 vehicle.
10. Income Tax Regulations, section 1100, subsection 1100(2) (the half-year rule and the first-year factors) and subsection 1100(2.5) (the year of sale of a Class 10.1 vehicle).
11. Income Tax Regulations, section 1101, subsection 1101(1af), a separate class for each Class 10.1 vehicle.
12. Income Tax Regulations, section 1104, subsection 1104(4.01), the definition of reaccelerated investment incentive property.
13. Income Tax Regulations, Schedule II, the description of Class 10.1.
14. Income Tax Act, section 230, subsections 230(4) and 230(4.1), the six-year retention period and electronic records.