Business-Use Percentage: How to Calculate It for Vehicle, Home Office, and Phone

This is general information, not professional tax advice. For official guidance, see the CRA's business-use-of-home expenses page or talk to a tax professional.

Your vehicle, your home office, your phone — none of them are 100% business, and none of them are 100% personal either. For every mixed-use asset like this, the CRA doesn't ask you to guess a number that sounds fair. It asks you to calculate a percentage, apply it consistently, and be able to explain how you got there. Once you understand the pattern, it's the same three questions every time: what's the whole, what's the business part, and what evidence backs up the split.

The core idea: split by actual use, not a vibe

Every business-use percentage on a T2125 works the same way at heart: business use ÷ total use. What changes is what you're measuring — kilometres for a vehicle, square footage for a room, minutes or a sample bill for a phone. The CRA's language across all of these is "a reasonable basis." That phrase is doing real work: it means there's no single fixed formula handed to you, but it also means "I just picked 60% because it felt right" won't survive a review. You need a method, and ideally a record showing how you applied it.

Vehicle: the logbook percentage

For a vehicle, the whole is total kilometres driven in the year; the business part is kilometres driven for work — client visits, supply runs, travel between job sites (an ordinary commute to a regular workplace doesn't count). The CRA expects a full logbook for your first year (a "base year"), then lets you use a 3-month sample logbook in later years, as long as that sample stays within 10 percentage points of the same stretch in your base year. We've covered this one in full in Vehicle Deductions for Canadian Freelancers, including how the CCA rules layer on top once you've got your percentage.

Home office: the square-footage percentage

For a home office, the whole is your home's total finished square footage; the business part is your workspace's square footage. A 150 sq ft office in a 1,500 sq ft home is 10%. If that space also doubles as a guest room or gets used personally in the evenings, the CRA's guidance adds a second factor: divide the hours per day you actually use it for business by 24, then apply that fraction to the area-based percentage. A room used 8 hours a day for business (⅓ of the day) inside a 20%-of-home space nets out closer to 6-7%, not 20%. Full details, including the exclusive-use test and what you can actually deduct once you have the number, are in Home Office Tax Deduction for Canadian Freelancers.

Phone, internet, and other mixed bills

Phone and internet don't come with a CRA-published formula the way meals get their 50% rule. Here the "whole" is your total usage or total bill, and the business part is whatever you can defensibly show is work — a sample month of itemized call/text/data use, or simply owning a second line used only for business (100% deductible in that case). We go through the specific rules, including the home-landline exceptions, in Claiming Your Cell Phone Bill. If you're also claiming a home office and the same internet bill factors into that calculation, don't count it twice — pick one line on the form and apply it there.

Does your percentage need to stay the same every year?

No — and it shouldn't, if reality changed. There's no rule locking you into last year's number forever. What matters is that whatever percentage you use reflects your actual situation for that tax year, and that you're not swinging it up and down without a real reason. If you moved to a bigger home office, dropped a client that accounted for a lot of driving, or switched to a business-only phone line partway through the year, recalculate and use the new number — prorating for the part of the year each setup applied, if the change happened mid-year. What you want to avoid is an unexplained jump from 15% to 60% with nothing behind it; that's the kind of inconsistency that invites questions, not the fact that a number changed at all.

What "reasonable" really means here

In practice, "reasonable" means three things across every mixed-use category: the method matches how the expense is actually measured (space for a room, distance for a vehicle, usage for a phone), the number you land on is something you could re-derive on request, and you didn't just take the most generous interpretation available because no one was checking. A percentage that's slightly conservative and well-documented holds up better in a review than a bigger number with nothing behind it.

Documenting your math

For each mixed-use expense, keep two things: the record that let you calculate the percentage (a logbook, a floor plan or room measurements, a sample month's phone bill breakdown) and the actual receipts or statements for the dollar amounts you're prorating. Keep both for six years from the end of the relevant tax year, same as any other business record. The percentage is the part people forget to document — it's easy to remember you claimed "40% of the car," much harder to reconstruct a year later how you got to 40% in the first place.

This is general information, not professional tax advice. Always confirm current rules on canada.ca or with a qualified tax professional, especially if your circumstances are unusual or you're preparing for a CRA review.