Has anyone claimed the 50 cents / Km from CCRA on a home business?

Question

If I earn a salary and also have a secondary home business, say advising about RRSPs, can I claim the 50 cents / Km when I drive to Thunder Bay for a wedding & fishing and talk to relatives about their RRSP?

I know women sell cookware and cosmetics as a part-time job, and I presume they claim their mileage as a business expense against their combined yearly income (full time job $$ + part time job $$).

At 7 Litres per 100 Km; @ $1.25 / L.; 2000 Km; gas costs are $175. The tax deduction is (2000 X .50) $1,000 off my taxable income, or (at 30% tax bracket) $300 in my pocket.

Sound reasonable? Have I made an error?

If Ford Motor Co. told me to drive to Thunder Bay and talk to the mechanics / dealers there, it would be a business expense for the Ford Motor Co.

Answer 1

When you report business income and deductions, there is no such provision to claim a set amount per kilometer. You can only claim what you have actually paid. The other posters have addressed the legitimacy of such a claim, so I will tell you that you actually need to keep a log book for every motor vehicle claim you make. This means you must write down exactly how many kilometers you drove to work in the morning, then to lunch, then to the grocery store, then home, then to the gas station, then to your hairdressers. etc... etc.... and you need to determine how many kilometers are for personal ( which includes driving to your workplace ) and how many are for business. In your case it would be very low...

Let's say you came up with 10% of your total driving was for business. You would also have to keep ALL of your fuel receipts and add them up, and you would then be able to claim 10% of the total fuel receipts you have provided. This would be your fuel claim. The same percentage would follow through on maintenance and repairs, and insurance etc...

Also, your business has to have the potential to earn income. If you have not earned any income from this business, you cannot claim any expenses.

Now... all of this would only have to be proven if you were chosen for audit. I doubt you would be checked out if you claimed 10% or another small amount, but your deductions have to be reasonable overall.

Answer 2

The important issue is whether your 2nd home business has a reasonable expectation of profit, which will be decided upon your (a) education, experience and qualifications in that business (e.g., do you have a license to sell RRSP?), and (b) your efforts in getting customers, revenue and expenses in that business.

If you are not qualified to sell RRSPs, and if you continue incurring expenses or losses with little or no revenue, your deductions may be denied by the CRA. The CRA has denied deductions of many Amway home operators, horse gamblers, etc. as without reasonable expecation of profit.

If the primary purpose of your trip was to the wedding and fishing, you cannot claim the mileage, even though you incidentally talk to your friends and relatives about your RRSP business. The problem is you spend more time attedning the wedding and fishing, than selling your rrsp.

Ford Motor is a corporation and is a legit business and visiting its dealers is also a legit business activities. But your secondary home "business" may not be legit, and appears to be an attempt by you to reduce your primary salary income and taxable income. In other words, your mileage expenses may not have been incurred for bona fide business purposes.

Answer 3

If CRA checks (and they very well might if you take deductions like that), a 200 km trip to attend a wedding and 'talk to relatives' will almost certainly result in a denial of the claim.  It might also trigger audits on any and all such claims, past and future.

Face it, you're talking about a personal trip and trying to make US (the taxpayers of Canada) partially fund it.  It won't fly.

Answer 4

You have to be able to offer an explanation of how this trip might conceivably help you to earn money.

Now, if you do earn some money (revenue) as a result of this trip, even should it not cover the costs, this makes valid the assumption that you could make money this way.

You CAN, OF COURSE,  do some pro-bono work which is not expected to bring in money, if its objective is to enhance your reputation,  Giving free advice to low income people would be in that category.

But, over a period of time, the home business has to make progress toward becoming profitable or you need to have a plan that suggests it will. You can not run a money-losing business for long and write the losses off against non-business income. You can write expenses off against revenues of the business, and you can carry forward business losses to offset future business revenues.