Business ->
Vehicle expenses
What vehicle expenses can be deducted by a business?
When any vehicle is used for both business and pleasure
purposes, it is important to maintain travel details in a trip
log.
Unincorporated
businesses
Income tax act s. 18(1)
An unincorporated
business may deduct all reasonable motor
vehicle expenses which are related to the business use of
the vehicle, after applying
the limitations regarding passenger vehicles.
If, for instance, 60% of your mileage is for business
purposes (40% personal), you can deduct 60% of the expenses related to the vehicle.
See also the CRA interpretation bulletin IT-521R
Motor vehicle expenses claimed by self-employed
individuals.
Corporations
Corporations may deduct all reasonable motor
vehicle expenses, after applying
the limitations regarding passenger vehicles.
If a shareholder or employee uses a company-owned automobile
for personal purposes, a taxable
benefit will be added to their income. The rules
regarding automobile taxable benefits were changed
starting in 2003, making it less costly to employees and
shareholders to use company-owned vehicles for personal
use.
Before making the decision as to whether to
purchase an automobile personally or in the company name,
all the income tax implications should be reviewed.
What
expenses are included as motor vehicle expenses?
Motor vehicle expenses include interest on loans to
purchase automobiles, capital cost allowance
(CCA), automobile leasing costs, and
operating expenses such as fuel, oil, maintenance
and repairs,
licence 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.
Tax tip: When a vehicle is
driven for both business and pleasure use, a trip log must be used to record the
mileage.
Revised: July 19, 2010