Limit on Vehicle Cost for GST/HST Input Tax Credits
Corporations GST/HST ITC for Vehicles or Aircraft
Partnerships and Individuals (Self-Employed) GST/HST ITC for Vehicles
Vehicle Input Tax Credit Example For Self-Employed Individual
Summary of GST/HST ITC Entitlements Passenger Vehicles and Aircraft
Canada Revenue Agency (CRA) Resources
The amount of input tax credit (ITC) that can be claimed for the purchase of vehicles and aircraft depends on
There is a maximum capital cost on which an ITC may be claimed for a passenger vehicles. The maximum, excluding GST/HST and provincial sales taxes, is the same as limit for capital cost allowance. This limit applies to all types of business entities. The Department of Finance normally has a news release at the end of December each year to announce capital cost limits for passenger vehicles.
See the Canada Revenue Agency (CRA) table of Vehicle Definitions on our Business page.
If the vehicle or aircraft is acquired by a corporation for use primarily (more than 50%) in the commercial activities of the registrant, the ITC is 100% of the GST/HST paid, subject to the above capital cost limitation. Otherwise, no ITC may be claimed. The ITC is claimed by the corporation in the GST/HST return for the period in which the acquisition occurred.
If the vehicle or aircraft is acquired to be used all or substantially all (90% or more) in the commercial activities of the registrant, the ITC is 100% of the GST/HST paid, subject to the above capital cost limitation for passenger vehicles. This ITC would be claimed in the GST/HST return for the period in which the acquisition occurred. The 100% ITC is available even if the vehicle may be made available to an employee for personal use. However, the personal use by the employee will result in a taxable benefit to the employee, which will be subject to GST/HST.
If the use in commercial activities of the registrant is 10% or less, no ITC can be claimed.
With commercial use greater than 10% and less than 90%, the ITC is based on the capital cost allowance (CCA) claim for the vehicle at the end of each tax year, except in a year in which the use of the vehicle or aircraft results in a taxable benefit to an employee of the business. In this case, no ITC can be claimed in the year. Once the CCA has been calculated for the vehicle, calculate your ITC as shown in the calculations below.
The calculations are based on the GST or HST rate in effect for your province or territory on the last day of each taxation year. See CRA document GI-038 The 2008 GST/HST Rate Reduction, under the title Purchase of a passenger vehicle for a sole proprietor or partnership for confirmation that the rate on the last day of each taxation year is the appropriate rate to be used.
The formulas such as 5/105, 13/113 and 15/115 are used in the calculation of the input tax credits in order to calculate the ITC on the adjusted cost base excluding GST/HST and PST.
On or after July 1, 2016 until March 31, 2025 (when NS rate is reduced to 14%):
| Province/Territory Sales Tax Type | 2017-2024 |
| In a province or territory in which only GST is collected | CCA x 5/105 |
| In a participating province (HST is collected): | |
| - in ON | CCA x 13/113 |
| - in NB, NL, NS & PE | CCA x 15/115 |
See Sales Tax Rates for rates for each year for each province and territory.
Example: a self-employed person in British Columbia purchases a passenger vehicle in 2024 for $38,000 + 5% GST + 7% PST = $42,560. The vehicle will be used approximately 60% for business use, and 40% for personal use, so the ITC is based on the capital cost allowance for the vehicle at the end of each year. The example below uses 60% business use in each year, where in reality it is not likely the % would be the same in each year, as it is based on actual business mileage (see Trip Log on the Business page).
Note that an individual who is an employee, and receives a tax-free automobile allowance from their employer cannot claim an ITC related to their automobile. The ITC is claimed by the employer.
The CCA rate for passenger vehicles is 30%, and the half-year rule applies, so the CCA for the first year is only 15% of the lesser of $37,000 (2024 limit) or the purchase price, plus tax. All amounts are rounded to even dollars.
| Year 1 (2024 tax year - 5% GST + 7% PST) | |
| Description | ITC |
| Cost added to CCA class 10.1
(max allowed) = $37,000 + 5% GST + 7% PST (A) |
$41,440 |
| CCA (half-year rule) = 15% x $41,440 (B) | $6,216 |
| Business portion @60% x B | $3,730 |
| GST input tax credit year 1 = $3,730 x 5/112 (C) | $167 |
| Year 2 (2025 tax year - 5% GST + 7% PST) | |
| Description | ITC |
| Beginning UCC = A - B - C (D) | $35,057 |
| CCA = 30% x D (E) | $10,517 |
| Business portion @60% x E | $6,310 |
| GST input tax credit year 2 = $6,310 x 5/112 | $282 |
If the purchaser was a business in Nova Scotia, and paid 15% HST when purchasing a vehicle prior to April 1, 2025, the rate used to calculate the input tax credit for the vehicle for a year end after March 31, 2025, would be 14/115.
The input tax credit each year is based upon the GST/HST rate applicable at the end of the year. The cost of the passenger vehicle eligible for an input tax credit is limited to the limitation for capital cost allowance purposes.
Following is a reproduction of the CRA table in GST Memorandum 8-2 outlining ITC entitlements on passenger vehicles and aircraft:
| ITC Entitlement on Passenger Vehicles and Aircraft | |||
| % of use in commercial activities |
General registrants (corporations) and public service bodies |
GST/HST registered individuals and partnerships |
Financial institutions |
| ≤ 10% | No ITC | No ITC | ITC = actual % of use |
| > 10% up to 50% | No ITC | CCA based ITC(1) | ITC = actual % of use |
| >50% and < 90% | Full ITC | CCA based ITC(1) | ITC = actual % of use |
| ≥ 90% | Full ITC | Full ITC | ITC = actual % of use |
Notes:
Re symbols used above:
(1) except where the use of the passenger vehicle or aircraft results in a taxable benefit under paragraph 6(1)(e) of the Income Tax Act (standby charge).
Trip Log for Business Use of Vehicle
Vehicle Cost Limitations for Capital Cost Allowance Purposes
Vehicle Definitions for Tax Purposes
RC4022 General Information for GST/HST Registrants
GST/HST Memoranda Series Chapter 8-1, General Eligibility Rules
GST/HST Memoranda Series Chapter 8-2, General Restrictions and Limitations
GST/HST Memoranda Series Chapter 8-3, Calculating Input Tax Credits