What Are the Canadian Business Expense Rules for your Vehicle?
Canada’s tax laws allow you to claim your vehicle as a deduction, but there are conditions. Here are the Canadian business expense rules for your vehicle.
Many business owners ultimately purchase two cars: one for their personal use and one for business use. Having the two cars simplifies things because there’s no need to determine how many miles were for business and how many were personal miles. Another advantage is that all the repairs to the business vehicle can be claimed as a tax deduction.
What the CRA considers “permissible” business vehicle expenses
When you own a car that’s only used for business, there are several different things the CRA allows you to deduct. Permissible deductions include:
- Routine vehicle expenses (gasoline, new tires, maintenance, repairs)
- Interest on the auto loan
- Vehicular depreciation
Using Your business vehicle for promotion
Having your business name on the side of your business vehicle is a great way further use the vehicle as a tax deduction. Whether you opt to get a vinyl wrap or magnets for your vehicle, the cost of the items is completely tax deductible. Having the name of your business emblazoned on the side of the car helps clarify that the vehicle really is used for business purposes.
The one thing you shouldn’t do is assume that just because you’re using the vehicle as a mobile billboard, that the CRA allows you to deduct the personal miles you put on it. The good news is that even though the CRA won’t let you claim mileage for the times you use the vehicle for things like picking up groceries and taking the kids to band practice, at least you’ll get some satisfaction from knowing you’re still promoting business.
Something to consider when travelling for business
If you want to reduce wear and tear on your own vehicle when you’re driving a long distance for business, you should consider renting a car. Not only does this keep the extra mileage off your own vehicle, but it’s also another CRA approved business deduction. Many business owners find that this is a great way to determine if a specific make/model of a vehicle will make a suitable future business vehicle.
The experts at E&E understand that it’s not always easy to determine what the CRA will and won’t accept as a legit business deduction, which is why we’ve spent so much time learning the in and outs of Canadian tax law. We invite you to contact us about using our knowledge to your benefit.
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