As a business owner, there are multiple costs you may claim on your personal income taxes – vehicle expenses being one of the classifications of these costs. Not only does accurate expense documentation contribute to the total amount claimed, but the type of vehicle you own will also have an effect.
Do you use your personally owned vehicle for business?
If your vehicle is used for both personal and business, you can claim the business-related portion of any vehicle expenses. In these cases, it’s best practice to use a logbook to reflect all automobile expenses for the year.
What should be included in my vehicle logbook?
You should be recording as much information and receipts as possible to prove your expense claims:
– Dates
– Kilometers driven (including starting and ending odometer readings)
– Destination
– Nature of business trip
What other vehicle expenses should I be documenting?
Recording and providing invoices/receipts of these costs is important as you can deduct the vehicle expenses you incur to earn business income.
– Fuel and oil costs
– Maintenance and repairs
– Insurance
– License and registration fees
– Interest on money borrowed to buy a motor vehicle
– Leasing costs
– Capital cost allowance
Motor Vehicle vs Passenger Vehicle
The vehicle expenses you can deduct vary depending on the kind of vehicle you own.
As per the Canada Revenue Agency :
“A Motor vehicle is an automotive vehicle designed or adapted for use on highways and streets. A motor vehicle does not include a trolley bus or a vehicle designed or adapted to be operated only on rails.
A Passenger vehicle is a motor vehicle that is owned by the taxpayer (other than a zero emission vehicle) or that is leased, and is designed or adapted primarily to carry people on highways and streets. It seats a driver and no more than eight passengers. Most cars, station wagons, vans, and some pick up trucks are passenger vehicles.”
Please see below Vehicle Definition Chart provided by the Canada Revenue Agency:
Type of vehicle
Seating (includes driver)
Business use in year bought or leased
Vehicle definition
Coupe, sedan, station wagon, sports car, or luxury car 1 to 9 1% to 100% passenger
Pick-up truck used to transport goods or equipment 1 to 3 more than 50% motor
Pick-up truck (other than above) 1 to 3 1% to 100% passenger
Pick-up truck with extended cab used to transport goods, equipment, or passengers 4 to 9 90% or more motor
Pick-up truck with extended cab (other than above) 4 to 9 1% to 100% passenger
Sports utility used to transport goods, equipment, or passengers 4 to 9 90% or more motor
Sports utility (other than above) 4 to 9 1% to 100% passenger
Van or minivan used to transport goods or equipment 1 to 3 more than 50% motor
Van or minivan (other than above) 1 to 3 1% to 100% passenger
Van or minivan used to transport goods, equipment, or passengers 4 to 9 90% or more motor
Van or minivan (other than above) 4 to 9 1% to 100% passenger
What happens when a business owned vehicle is used for personal use?
When a company owned automobile is made available for personal use, then an operating cost and a standby charge must be calculated.
What is an operating cost?
The operating cost is generally calculated per kilometer of personal use and includes things such as:
– Gasoline & oil
– Liceses & insurance
– Maintenance and repair expeses
What is a standby charge?
The standby charge is used to estimate the taxable benefit on an automobile used for personal driving. As per the Canada Revenue Agency website “The standby charge is for the benefit your employee gets when your owned or leased automobile is made available for their personal use.”
The standby charge is based on several factors:
– Total amout of days available to employee
– Extent of personal use
– Purchase or lease cost including tax
This taxable benefit will be included on your T4 of T4A at the end of the calendar year.
There is no taxable benefit when:
– The employee only drives the automobile within their employment duties
– The automobile is returned at the end of the employee’s work day
– The automobile is not used for any personal driving
In conclusion:
Keeping a kilometre log is highly recommended for company-owned vehicles if the CRA conducts an audit.
An Automobile Benefits Online Calculator can be found on the CRA website to assist in finding the value of these automobile costs.
All this information and more can be found on the Canada Revenue Agency website:
