Shareholder Guide: How to Properly Account for Business Use of Personal Vehicle and Home
As a shareholder in your own corporation, it's common to use personal assets like your vehicle and home office for business purposes. However, the Canada Revenue Agency (CRA) applies specific rules to ensure these expenses are properly documented and justified. Missteps can lead to taxable benefits or denied deductions, so it's essential to understand when these uses qualify and how to handle them correctly.
Business Use of Personal Vehicle
If you own the vehicle personally and use it for business travel, your corporation can reimburse you in one of two ways. Each method has its own requirements and tax implications.
1. CRA Prescribed Kilometre Allowance
Your corporation may pay you a non-taxable allowance based on CRA’s prescribed rates, provided the travel is for employment duties and the rate is considered reasonable.
2025 CRA Rates:
$0.72 per kilometre for the first 5,000 km
$0.66 per kilometre thereafter
Requirements:
You must maintain a detailed mileage log, including date, destination, purpose, and kilometres driven
The travel must be tied to employment duties, not general shareholder oversight
The allowance must be paid in cash and not exceed CRA’s rates
If these conditions are met, the reimbursement is non-taxable to you and deductible for the corporation.
2. Actual Expense Reimbursement
Alternatively, the corporation may reimburse you for actual vehicle expenses based on the proportion of business use.
Eligible Expenses:
Fuel
Insurance
Repairs and maintenance
Licensing and registration
Interest on vehicle loan (if applicable)
Requirements:
Maintain receipts for all expenses
Track total kilometres driven and business kilometres separately
Calculate the business-use percentage and apply it to total expenses
This method requires more documentation but may result in higher reimbursement if your vehicle costs are substantial.
Business Use of Personal Home
CRA allows shareholders who also perform employment duties to claim home office expenses, provided the space meets specific criteria. A formal employment agreement is helpful for documentation, but not mandatory if the nature of the work clearly supports the claim.
When It Qualifies:
You must meet one of the following conditions:
The home office is your principal place of business, or
It is used exclusively to earn business income and you regularly meet clients or customers there
If your home is the corporation’s business address and you perform essential duties there, such as administrative work, client communication, or strategic planning, it likely qualifies.
How to Calculate the Deduction:
CRA expects you to prorate expenses based on both space and time used for business.
Space Allocation: Determine what percentage of your home the office occupies. For example, if your office is 200 sq ft and your home is 2,000 sq ft, that’s 10%.
Time Allocation: If you use the space for business only half the time, apply a 50% time-use factor.
Total deductible portion example:
Space % × Time % = Business-use %
10% × 50% = 5%You would then apply that 5% to eligible home expenses.
Eligible Expenses:
Utilities (electricity, heat, water)
Internet and phone (if not separately billed for business)
Property taxes
Rent or mortgage interest
Home insurance
Maintenance and repairs (only those affecting the whole home or the office directly)
Important Notes:
Reimbursements from the corporation must be reasonable and supported by documentation
Improper claims may be treated as shareholder benefits, which are taxable and non-deductible for the corporation
CRA expects consistency and clarity in how these expenses are documented
Final Tips for Compliance
Keep detailed records, including mileage logs, receipts, and written agreements
Ensure all reimbursements are tied to employment duties, not shareholder activities
Review your setup annually with a tax professional to stay aligned with CRA expectations
Conclusion
Using personal assets for business is common among shareholders, but it requires careful planning and documentation. By following CRA’s rules and structuring reimbursements properly, you can avoid taxable benefits and ensure your corporation remains compliant. Whether you're driving to client meetings or working from your home office in Kamloops, clarity and consistency are key to making it work.