Has your company offered to pay for your vehicle expenses as a taxable benefit? If yes, it is time to reconsider your answer! Avoid paying taxes and deduct a portion of your car costs simply by using your personal car for businesses purposes.
Are you using your personal vehicle for business use? Is your company offering to cover your vehicle expenses as a taxable benefit? If the answer is yes – you may want to reconsider. If your employer agrees to pay for your vehicle expenses these become a taxable benefit to you and are included on your T1 Return.
To avoid paying tax, you can buy or lease your own vehicle and in-turn use it for business purposes. If you use your personal vehicle for work, you can deduct a portion of your car costs that are associated with carrying on your business duties. The most common expenses that are deducted and associated with your vehicle are:
- Repairs and maintenance
- Lease costs
- Capital cost allowance if you own your vehicle
- Vehicle registration fees
- Licensing fees
Learn how to keep a logbook to claim motor vehicle expenses on your return.
Another clever way to get compensated for your personal or leased vehicle costs is by using a Tax Free Vehicle Allowance. Your employer can pay you up to 55 cents per kilometer that you drive your car for business purposes – this is for the first 5,000 kilometers; it is then 49 cents for each additional kilometer after. This is completely tax free money to you.
The additional benefit of using your own vehicle, rather than one provided by your company, is that your insurance premiums are likely to be lower because they are under your personal name. Lease or buy a vehicle for business? Learn what is more advantageous to you here.
So Here’s the Tip:
If your employer offers you a company provided vehicle, consider saying no. Instead ask for a Tax Free Motor Vehicle Allowance – this is money completely in your pocket.
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.