Page 30 TRUCK NEWS July 2011
Deducting the use of a car,
van or pick-up for business
Know the rules or pay the price
Last month I got a call from a cli-
ent with questions about a vehicle
he planned to lease for his busi-
ness. We’ve been his accountant
for a long time and know each
other well. Scott taylor
When he mentioned some-
thing about a pick-up truck, I en- hicle separately based on its own
visioned a Ford or a Chevy – he’s business use.
a pretty austere guy.
But my client, an owner/opera-
tor whose hard work and smart There are all kinds of business
planning over the years certain- reasons to use your vehicle, from
ly has paid off, had something a revenue-producing courier de-
else in mind: a Cadillac Esca- livery to a trip that involves bank-
lade EXT. ing, a run to the parts store, or a
He rattled off more features meeting with your carrier.
than an ordinary dealer sticker What’s not valid is the drive
should have room for. The only from home to your truck. This is
thing missing was a big red flag considered commuting – a per-
to wave at the tax auditor. sonal trip. I’ve argued this with
One of the great myths of being CRA numerous times, using the
self-employed is that if you lease logic that since the business of-
a service vehicle you can write off fice is in the home, then driving
100% of the payment and related from the “office” to a work site is
expenses as business. business travel. I don’t think I’m
Others will tell you that the wrong, but I haven’t found an au-
type of vehicle – ie. pick-up truck ditor yet who has bought the ar-
vs. car – affects the amount or gument.
percentage of expenses you can
claim. Neither is true.
In fact, a tax auditor doesn’t If your vehicle is categorized as
care what type of vehicle you a “passenger vehicle,” your claim
have or how you finance it. He for your financing expense (ie.
only wants to see that your ve- lease payments or CCA and in-
hicle-related expenses were in- terest costs) has limits. Lease
curred to earn business income payments can’t exceed $800 per
and that you have documents to month.
support your claims. If you purchased the vehi-
cle, the cost can’t be more than
CRA is clear about the type of If the vehicle cost more, you can
vehicle expenses you can deduct. only add $30,000 plus the appro-
These include licence and reg- priate taxes (PST, GST or HST)
istration fees; fuel costs; insur- onto your CCA schedule. The
ance; interest on money borrowed other cost of purchasing – inter-
to buy the vehicle; maintenance est on your loan – is limited to $10
and repair cost; and your lease per day. So if you own the vehicle
payment or capital cost allowance for the entire year, $3,650 is the
(CCA or depreciation). maximum claim. If you own it for
To support your claim, you must less, you must prorate the interest
keep a record of the total amount expense claim for the appropriate
of kilometres you drive in a year number of days.
(ie. your odometer readings on
January 1 and December 31).
Then, each time you use the vehi- CRA’s guide, T4 0 02 Business
cle for business, list the date, des- and Professional Income, is a
tination, purpose, and the number great reference on motor vehi-
of kilometres you drive. cle expenses (look for it online
Now you can determine the at www.cra-arc.gc.ca). Note how
percentage of business use to be many times it mentions support-
applied against your expenses. ing claims with a detailed record.
Divide your business-use kilo- My client knows it. When he
metres by your total kilometres picked up his sweet new ride, one
for the year, giving you anywhere of the first things he did was re-
from 1% to 100%. cord the date, mileage, and reason
If you can’t produce a journal for the trip in a fresh notebook
or log detailing the business use and tuck it into the driver’s side
of the vehicle, validating that per- door pocket. n
centage figure, CRA can deny or
reduce your claim. – Scott Taylor is vice-president of
If you use more than one vehi- TFS Group, providing account-
cle for your business, keep a sep- ing, bookkeeping, tax return prep-
arate record that shows the total aration, and other business ser-
and business kilometres you drive vices for owner/operators. Learn
in each. Calculate and deduct the more at www.tfsgroup.com or call
cost to run and maintain each ve- 800- 461-5970.