Thinking of buying a new vehicle and wondering how to claim the associated costs?
When purchasing a vehicle for work, the question most commonly asked is “What can I write off?”
This question comes up often when it comes to the purchase of a vehicle for work.
What can I write off?
The answer depends on:
1) The TYPE of Vehicle according to CRA specifications. The type determines the amount you can deduct for Capital Cost Allowance and other expenses.
According the CRA the descriptions for the two vehicle types are:
a MOTOR vehicle
– is an automotive (motor) vehicle designed or adapted for use on highways and streets. This excludes a trolley bus or a vehicle designed or adapted to be operated only on rails.
a PASSENGER vehicle
– is a motor vehicle designed or adapted primarily to carry people on highways and streets.
Using this CRA definition chart below, allows us to determine which category your vehicle fits into.
2) Once it is established whether the vehicle is, for tax purposes, considered a “Motor Vehicle” or a Passenger Vehicle we can then establish the amount of ‘write off’ and amount of HST you can claim.
Vehicles Definitions Chart
This chart defines different types of vehicles as either passenger or motor vehicle based on the number of people it seats and its business use.
| Type of vehicle | Seating (includes driver) | Business use in year bought or leased |
Vehicle definition |
|---|---|---|---|
|
Coupe, sedan, station wagon, sports car or luxury car |
1 to 9 | 1% to 100% | passenger |
|
Pick-up truck used to transport goods or equipment |
1 to 3 | more than 50% | motor |
| Pick-up truck (other than above) ¹ | 1 to 3 | 1% to 100% | passenger |
| Pick-up truck with extended cab used to transport goods, equipment or passengers | 4 to 9 | 90% or more | motor |
| Pick-up truck with extended cab (other than above) ¹ | 4 to 9 | 1% to 100% | passenger |
| Sport-utility used to transport goods, equipment or passengers | 4 to 9 | 90% or more | motor |
| Sport-utility (other than above) | 4 to 9 | 1% to 100% | passenger |
| Van or minivan used to transport goods or equipment | 1 to 3 | more than 50% | motor |
| Van or minivan (other than above) | 1 to 3 | 1% to 100% | passenger |
| Van or minivan used to transport goods, equipment or passengers | 4 to 9 | 90% or more | motor |
| Van or minivan (other than above) | 4 to 9 | 1% to 100% | passenger |
Footnotes
A vehicle in this category is considered a motor vehicle if it is used mainly to transport goods, equipment or passengers while earning or producing income at a remote work location or at a special worksite that is at least 30 kilometres from the nearest community having a population of at least 40,000.
Vehicles classed as a MOTOR vehicles use CCA Class 10 as do Passenger vehicles that cost $30,000 or less, not including taxes.
Passenger Vehicles costing more than $30,000 are considered luxury vehicles and belong in Class 10.1
Ideally you want your vehicle to class as a Motor Vehicle Class 10. There is no limit on the amount of this vehicle that is “claimable”.
Even with this class, supportive documentation indicating that the vehicle is a necessary element to your earning
income is needed. An extended cab may be flagged for clarification and supportive documentation about what is carried in your truck / van.
Passenger Vehicles Classed as Class 10:1 are limited to $30,000 whether or not the vehicle costs more than $30,000 (before tax). This holds true not only for CCA claimable on your income tax but also for claiming HST paid on the vehicle. (caps at $3900.00)
Tax Tip: It is ideal for tax purposes, if we can classify it as a Class 10 and if you can time your new vehicle purchase for the end of your business’s fiscal
year. That way you get to claim the 50% of Capital Cost Allowance for the entire tax year (even though you didn’t have the vehicle until near the end) and then next year get a full 100% CCA cost on the vehicle.
Disclaimer: This is for general information and has no guarantee of being supported by CRA tax authorities. E&OE
Article by: Phyllis Balkwill, CPB
Written: 2017