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Car Expenses on Tax Return

Car Expenses on Tax Return

Old May 29th 2019, 9:00 pm
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Default Car Expenses on Tax Return

Hi,

Recently whilst in London, Ontario, I met with someone who does the job I am interested in. Salary is similar (let’s ignore cost of living differences etc) but I would not get a car allowance which I do here. He mentioned that he claimed back most of the expenses and some of the capital cost of the car back on his tax return and that it basically paid for the loan payments. I have looked online as to what you can claim if using a car for work (not just driving to and from) and it is not very clear. Any ideas as to how it works / what can be claimed for?

Thank You!

Last edited by EngCan; May 29th 2019 at 9:03 pm. Reason: submitted before finished
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Old May 29th 2019, 9:16 pm
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Default Re: Car Expenses on Tax Return

Car allowances are not very common at all in Canada. My wife had one in a previous job and she got a new car every year + 1 day. All insurance/petrol/repairs covered etc and we could use it on personal trips. I do believe it was a taxable benefit.

I'm self employed and I claim each year. As an 'employee' I don't think you can do this. I average about 75%-80% per year of work related mileage/non work related mileage and I claim that % as it applies to petrol/repairs/licence fees/maintenance/CAA membership/car insurance against my taxable income. Never had it investigated. The year I bought the car I put the cost down on the tax forms and the software figures out the capital cost allowance (CAA) per year. I bought the car outight so no loan but the tax forms allow that.

If you are self employed and work from home you can claim a % of the house as your office and deduct accordingly on heat/electricity/mortgage payments/home insurance etc.



Originally Posted by EngCan View Post
Hi,

Recently whilst in London, Ontario, I met with someone who does the job I am interested in. Salary is similar (let’s ignore cost of living differences etc) but I would not get a car allowance which I do here. He mentioned that he claimed back most of the expenses and some of the capital cost of the car back on his tax return and that it basically paid for the loan payments. I have looked online as to what you can claim if using a car for work (not just driving to and from) and it is not very clear. Any ideas as to how it works / what can be claimed for?

Thank You!
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Old May 30th 2019, 3:04 am
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Default Re: Car Expenses on Tax Return

There's lots of info online on this. IANAA (I am not an accountant) but if you're self-employed there's a choice between apportioning actual expenses (depreciation, maintenance, etc) based on business vs personal mileage, and claiming a reasonable per kilometre rate. Generally the latter is easier as it involves a lot less paper work. Arguably it is more profitable too.

Note that travel to/from your normal place of employment is not allowable for tax purposes.

Companies may pay mileage rates (often less than the maximum allowed for tax purposes) for occasional usage of a personal vehicle. Or you might be required to rent a car.

Company cars are a taxable benefit (you have to track business vs personal use or get stuck with an assumed personal benefit from having the car sitting on your driveway) so are uncommon unless your job requires a lot of traveling.

If you are required to travel but not recompensed, you can claim this as a necessary expense on your tax form (if I remember correctly - it's a long time since I've been an employee), but personally I would not work for a company that did this: very easy to end up badly out of pocket. Not sure if you just get the tax back or the full amount. I know the people who used to deliver our (rural) post quit because they were making practically nothing because they had to use their own vehicles.

Lots more info than you probably wanted on the Canada Revenue Agency website.
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Old May 30th 2019, 11:24 am
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Default Re: Car Expenses on Tax Return

When I used to claim for use of the car my accountant had me buy a second car and write off 100% of that. His logic was that the log book for a single car shared between business and personal use would always be wrong and an invitation to audit. Some years ago the rules changed and it was no longer worthwhile for me, a self employed person using the car for business, to claim it.
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Old May 30th 2019, 1:41 pm
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Default Re: Car Expenses on Tax Return

Originally Posted by EngCan View Post
Hi,

Recently whilst in London, Ontario, I met with someone who does the job I am interested in. Salary is similar (let’s ignore cost of living differences etc) but I would not get a car allowance which I do here. He mentioned that he claimed back most of the expenses and some of the capital cost of the car back on his tax return and that it basically paid for the loan payments. I have looked online as to what you can claim if using a car for work (not just driving to and from) and it is not very clear. Any ideas as to how it works / what can be claimed for?

Thank You!
i don't get a car allowance..but i get mileage..i claim my car expense loan interest & deprecation as a tax deductible...it basically allows me to claim based on the % of business miles against personal miles ..so if it 50% business 50% personal i can claim 50% of my car expense etc...if my mileage benefit does not cover my other cost for the car..like gas maintenance insurance etc..i put my company mileage paid as an income and claim the difference under business mileage allowable..this part isn't probably quite right though
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