VIEWS: 3 PAGES: 1 POSTED ON: 8/9/2011
Page 30 TRUCK NEWS July 2011 tax talk 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 Tax Talk 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. Valid trips 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 Financing 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 Allowable expenses $30,000. 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 Resources 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.
"Deducting the use of a car_ van or pick-up for business"