Why You Should Use Your Personal Vehicle for Business Use

Allan Madan, CA
 Jun 30, 2015
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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:

vehicle for business use

  • Insurance
  • Repairs and maintenance
  • Gas
  • 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.

vehicle for business useThe 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.
 

Disclaimer

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.

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Comments 4

  1. Hi Allan,
    To date, my corporation has been paying me an allowance of 55c/km (and 49c/km > 5000km). It was my understanding that if I employ that method, I cannot also claim a business-use percentage (95% in my case) of my vehicle expenses (gas, insurance, etc).

    Am I incorrect? The video could be perceived in a way that makes me think that I could claim BOTH the mileage allowance AND 95% of my vehicle expenses (which I thought not to be true).
    It could also be perceived to mean EITHER / OR (which I thought to be true)

    Thank you very much for the great blog material, as always!

    1. Hi Neelan,

      You have two options for your personally owned vehicle.

      (1) Receive a tax-free vehicle allowance of 55 cents per KM for the first 5,000 KM’s and 49 cents for each KM thereafter
      (2) Receive a taxable flat monthly allowance (e.g. $600 / month)

      You cannot do both. Remember to complete form T2200 so that you can deduct your car expenses on form T777, if you are receiving a flat monthly allowance.

  2. Hi, I’m purchasing a Mercedes. I’m a small business owner and I’m wondering if it’s better to buy the car under my business or personal id. My understanding is also that the amount compensated for s-corps is based on the market rate value of the vehicle.
    I’m also somewhat concerned about the possibility of the company being held liable in the advent of an unfortunate accident.

    1. Hi Rowe,

      Thanks for your question. If 50% or more of your driving in the year is business related, then consider purchasing or leasing a vehicle through your corporation. The benefit is that the corporation can write-off 100% of the vehicle’s expenses. You will have to report a taxable benefit on our return for the personal use of the vehicle, but this benefit will be reduced since you are driving the vehicle primary for business purposes.

      For a more in depth answer, I need additional information from you such as the specific number of KMS you’ll be driving each year for personal and business purposes, cost of the vehicle, and running expenses for the vehicle.

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