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I spoke with a client yesterday who had been given some misinformation while listening to a speaker at a networking event.
The question is "when do I claim business mileage?"
Business Mileage that is allowable as a business deduction is not a random number you choose. It is calculated based on a formula: number of kilometres driven for business purpose divided by total kilometres driven in the vehicle for the calendar year times 100 to come up with the allowed percentage for that calendar year.
Let's delve into this further:
First thing to note - and this is where the speaker was leading people wrong - is WHEN to start clocking your mileage.
My client's speaker at the networking event gave misinformation to her listeners in that she said Mileage is not to be clocked from your home to your first business client of the day and this is NOT completely accurate; it is only half the story. This is confusing so let me explain by two illustrations:
Greg is a computer technician who has a shop in town about 10 km from his home. He drives to the shop every morning, and works at that location, however is often called to his clients' location to fix a computer. Greg does not clock his miles from his home to the shop, however he can clock his miles from the shop to the client location and back to the shop when he goes to fix the computer.
Greg's brother Tom, is also a computer technician but he does not have a shop in town; he lives down the road from Greg, runs his business from an office in his home and he also will visit clients to fix their computer at their location. Tom clocks his miles from his driveway to the client and back to his driveway.
What is the difference? The difference is where the business activity of the person clocking the mileage takes place. Greg can only claim his miles from his business location (his shop). Tom is allowed to claim from his home because that is where his business activity takes place.
Summation: If you run your business from your home, you are allowed to claim your mileage from your home to your first client. However, if you have a physical business establishment away from your home, you cannot claim the mileage to get from your home to your place of business. This is an important distinction and worth mentioning because if you are a home based business you do not want to be forfeiting those miles.
I will discuss how to record and claim your allowable business mileage in a separate post.
Our goal at BCD is to always have the best knowledge and the most current information available to our clients.
To this end, I am continuing my ongoing Professional Development through a series of webinars hosted by Canada Revenue Agency, that focus on topics that are often confusing for employers. These include Taxable Benefits, Vehicle Allowance and Benefits, Parking Policies and Gifts and Awards.
If you have questions about how any of these topics may affect your business, give us a call at 613-371-9661