If a company leases a car for me, is it a taxable benefit? Is there a way for me to have my company simply pay for it?
Allan Madan, CA
Yes, there is a taxable benefit to you should your employer lease a car for you. These benefits are knows as the stand-by-charge and the operating cost benefit. The stand-by-charge means that you derive a benefit simply because the leased car is available for your use. The operating benefit is calculated based on the personal kilometers you drive in a year. To find out the amount of stand-by-charge and operating cost benefit please see the CRA’s online automobile benefits calculator.
In order to minimize your taxes, offer to pay the lease yourself. In exchange, ask for a tax-free automobile allowance, which is 54 cents for the first 5,000 KMs, and 48 cents thereafter. If you drive a lot for employment purposes, the tax-free allowance could add up to a significant sum. Alternatively, if your employer insists on paying for the lease, then ask them to complete form T2202, Declaration of Conditions of Employment. This way, you can deduct the employment-use portion of all automobile expenses, including the employment-use portion of the lease, on your personal tax return.
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.
ABOUT THE AUTHOR
ALLAN MADAN
CA.CPA.CGA
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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