When can your car be a tax deduction?
“I wish I could write off driving my car to work as a business expense.”
Using your car as a tax deduction to help you out with the bottom line when it comes to filing taxes seems like it would be a winning solution to the cost of a car. I wish I could tell you that you can expense your car. However, the reality is that there are strict conditions for when you can claim your automobile as a deduction on your taxes.
Here are some guidelines for when your car can be a tax deduction:
Are you required to use your vehicle for your job?
Are you a real estate agent? Do you work in sales? Do you drive for Uber? Are you always driving around for work?
You may be able to write off some of the items here as a business expenses. There are some occupations that force you to travel for work. Driving to work and then back home (your regular commute) doesn’t really count. You can, however, claim a business expense tax deduction if your job makes it necessary to travel to complete the work.
The CRA states that you can claim your vehicle on your taxes when:
“Under your contract of employment, you had to pay your own motor vehicle expenses.”
Does this apply to you? You may be able to put this information in when you complete your taxes. Make sure you double-check the CRA website and consult with a knowledgeable tax professional before you move forward with your plan.
Are you self-employed?
Do you have your own business? Are you in a position where you’re required to drive often because of your business? You can write off your vehicle-related expenses on your taxes. However, things get complicated depending on if you have a corporation or not. There are many angles here and you really need to sit down with an accountant to see what works best.
According to the Financial Post:
“For employer and employees, deductible expenses include fuel and oil, maintenance and repair, licence and registration fees, and insurance. You may also be able to claim a rebate of any GST/HST paid on these expenses.”
There are plenty of occasions when your vehicle can be used for a tax deduction in Canada. Remember that you must track the kilometres that you actually use your car for your business. This means that you can’t count the distance that you travel in your work vehicle on your personal time. You need to keep good records that properly distinguish between work use and personal use.
Contact a tax professional if you have further questions You don’t want to jump into a brand new BMW because you think that you can write off some of the expenses for your business.