I started this post initially based on the concept of continuing on our discussion on cars and how they’re treated for Canadian tax purposes. I quickly realized, however, that there was so much meat on this topic that I really can’t do the rest of it justice in these tips of the day. So I’m going a bit more limited in the discussion and reminding everyone – work with your accountant on this! Don’t try and figure it out alone unless you have some experience in tax.
Today I’m going to simply share some really high level notes about corporate deductions on cars.
- Lease payments on a vehicle are deductible, but if the vehicle qualifies as a passenger vehicle rather than motor vehicle the payment amount is capped.
- Luxury passenger vehicles (those over $30,000) are capped at $30,000 in their capital cost allowance (CCA) class and there are specific ways to deal with any GST or HST on the purchase. CCA, as a reminder, is tax deductible depreciation on an owned vehicle.
You’ll note I keep referring to passenger vehicles versus motor vehicles. In a nutshell, this is a way CRA distinguishes between what would be more of a “company car” where there is potential for some or a lot of personal use, versus a motor vehicle which would not have the same potential. For instance, a four door car counts as a passenger vehicle in most circumstances where a two seat pickup truck used to transport good would be a motor vehicle (again, in most circumstances). There are often also use based tests that go along with the type of vehicle that you need to discuss with your accountant before you determine what the associated personal benefits on the vehicle may be.
Check back tomorrow for our discussion on personal benefits on company vehicles.