Alright! Last time we talked about owning your own car and running a sole proprietorship. Today we’ll focus on corporations whose owners or employees are tasked with using their personal vehicles for work.
Many business owners are tempted to buy corporate vehicles for themselves and/or employees. Sometimes this makes a lot of sense – especially when you need a specialty vehicle or you put heavy use onto the vehicle, such as in the oil patch. The tax for this, however, can be much more complicated.
As a result if you don’t have a specific need for a vehicle and simply use it to reach job sites or visit clients, it is often easier to use a personal vehicle that you already own. CRA has made a simple method for calculating what a corporation can deduct for use of personal vehicles. It is $0.55 for the first 5,000 kms driven, and $0.49 thereafter (for provinces). Simple and easy. These rates are for 2018 – for past years or territories you can click here.
The catch is this is designed to capture all costs associated with the vehicle including gas, registration, maintenance, insurance and depreciation on the vehicle itself. This is the only deduction the corporation can make for personal vehicle use. This means an inexpensive fuel efficient vehicle gets the same allowance as a big, brand new pickup truck with a V8.
The requirement for this deduction is to keep a log book. Again, using an app like Vezma or MileIQ is a great way to track what you need and know your business mileage. Remember, personal miles driven don’t count (including commuting to your office) so be sure to consult a professional to understand what trips you can and cannot deduct.
This allowance is also paid directly to the employees or you, as the owner/operator, tax free. There are GST implications (and possibly PST depending on province) so please consult your accountant or a GST specialist to learn how to deal with that.