DEDUCTING AUTOMOBILE EXPENSES FOR PROFESSIONALS


Incorporation offers several tax benefits when a vehicle is used for personal and professional reasons. Two options are available:

​1) The vehicle may be put in the name of the corporation;

2) The vehicle may be in your own name.

PURCHASE OF AUTOMOBILE BY THE CORPORATION

Your corporation will pay for all the fees associated with the vehicle. This includes: leasing fees, purchase cost, maintenance fees, repair costs, vehicle registration and insurance.

You must then calculate the taxable portion of those fees. This is based on the percentage of personal use of the vehicle.

Personal use:

  • Trips and vacations;

  • Personal errands;

  • Your normal drive from home to work.

You must add the taxable portion to your income. This portion will be paid by way of a dividend issued by your corporation.

AUTOMOBILE OWNED PERSONALLY

You can claim a portion of your vehicle costs that reflect professional usage on a per kilometer basis. Claims must be made regularly. It is necessary to keep a log book to track professional mileage.

WHICH OPTION TO CHOOSE?

In general,

1. If your vehicle is worth less than $55,000 (before tax), it is more advantageous to own it personally;

2. If your car is worth more than $55,000 (before tax):

a) It is more advantageous to own it personally if it is used more than 50% for personal reasons;

b) It is more advantageous to own it through your corporation if you use it for professional reasons more than 50% of the time.

3. If you do more than 20,004 km per year for professional reasons, it is more advantageous to own the vehicle through a corporation regardless of the cost of the vehicle.

An analysis of your personal situation will be required to determine which option is best for you.

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