How to Prevent Paying Car Tax

If you use a vehicle for work and would like to avoid paying tax on it. It is important that you do not pay for those related expenses through your business account. Rather, you should pay for it out of your personal account. This way it becomes a taxable benefit for you on your personal tax return.

There are a few options that you can use to learn how to prevent paying car tax. A common mistake made is paying for car expenses with a corporate bank account when you personally own your car. The amount paid becomes a taxable benefit to you and is reported in your personal tax return. You can’t get out of this trap even if you use your car partially or wholly for the business purposes.

Want to know how you can avoid car tax? Well, pay yourself a tax free vehicle allowance under 54 cents per kilometre for the first 5,000 k.m and 48 cents thereafter. The car allowance paid is also tax deductable to your corporation. This method avoids the dreaded car tax.

ABOUT THE AUTHOR

ALLAN MADAN

CPA, CA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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