Vehicle Expenses

When a vehicle is used for both personal and business purposes, it is necessary to keep a log to record the business use of the vehicle. Please see our article on keeping a vehicle log found here:

 

Unincorporated Business

An unincorporated business may write off (deduct) all reasonable motor vehicle expenses which are on account of the business use of the vehicle. If your trip log indicates that your use of the vehicle was 30% personal, and 70% business then you will be able to deduct 70% of the vehicles expenses.

 

Incorporated Business

An incorporated business may also write off all reasonable motor vehicle expenses.

If the business provides a company vehicle to a shareholder, or employee for personal purposes, a taxable benefit will be added to their income. Contact Barrett Tax Law Today.

 

Expenses Allowed

Motor vehicle expenses include interest on loans to purchase automobiles, capital cost allowance, automobile leasing costs, and operating expenses such as fuel, oil, maintenance and repairs, license and insurance costs, and car washes.

Parking costs are not included as motor vehicle expenses.  When the parking is related to business use of the motor vehicle it is 100% deductible, and when it is related to personal use it is not deductible.

 

Limitations Regarding Passenger Vehicles

Income Tax Act s. 13(7)(g), s. 67.2, s. 67.3, Income Tax Regulations R7307(1), R7307(2), R7307(3)

According to the Income Tax Act, there are limits on amounts that can be written off regarding passenger vehicles. These limitations are as follows:

  • Maximum deduction allowed for interest on a loan to purchase a passenger vehicle is $300 per month;
  • Maximum deduction allowed for monthly lease costs per passenger vehicle is $800 plus GST/ HST, less any GST/HST input tax credits claimed; and
  • Maximum cost amount for capital cost allowance purposes is $30,000 plus taxes less input tax credits.

Passenger vehicles are normally included in capital cost allowance class 10 or 10.1 if they cost more than $30,000 (30% CCA, 15% in first year). A terminal loss may not be claimed nor will recapture rules apply.

 

CRA Resources

Form T777, Statement of Employment Expenses

Form T2200, Declaration of Conditions of Employment

IT522, Vehicle, Travel and Sales Expenses of Employees

Motor vehicle records

Type of vehicle

Line 9281 – Motor vehicle expenses (not including CCA)

Deductible expenses

Guide T4002, Business and Professional Income

Form T2125, Statement of Business or Professional Activities

 

Case law

Kreuz v The Queen, 2012 TCC 238 – Employee Deduction of Motorvehicle Expenses and Res Judicata in Tax Cases

More detailed case law analysis may be found here: http://ita-annotated.ca/RecentDecisions/category/tax-deduction/motor-vehicle-expenses/

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