Things to Know for Claiming Tax Benefits Related to Vehicle Expenses
How do you use your vehicle? Do you use it both for personal and business purposes? If yes, it is imperative that you record the information related to your vehicle so you can refer to it while filing your taxes in future.
The CRA’s approach with regard to the official use of vehicles for business purposes is simple: it classifies the use under two heads namely, incorporated business and unincorporated business.
It is possible on the part of an incorporated business to write of motor vehicle expenses provided its use is reasonable. The reasonable use of a vehicle refers to its utilization by either an employee or a shareholder of a company for non-official or personal purposes.
In these scenarios, a taxpayer is eligible for a taxable benefit which is usually added to their income. At the time of considering or reviewing a request for a tax benefit, there is every possibility that the CRA will examine the relevant documents. So, it is strongly recommended that you should keep all the documents handy so as to produce them, if required, in a timely manner.
There is a slight variation in the rule in the case of unincorporated businesses. If the motor vehicle expenses linked to business use appears to be reasonable in the eye of the concerned authorities of the CRA, it can consider deducting or writing them off.
There is an additional condition, though. In view of the likelihood that a vehicle can be used for both business and personal purposes in this form of business, the CRA will only write off the part which is linked to the business use. The following example will make it clear.
If 30% of the usage of a vehicle was for personal purposes and 70% of it was for business-related activities, you would be allowed to claim a tax benefit on the latter.
What Is Allowed In The Tax Expenses?
If you have taken a loan to purchase an automobile or have spent on capital cost allowance, fuel oil, maintenance, insurance costs, repairs, car washes or operating expenses, you are eligible for claiming motor vehicle expenses.
As far as the parking costs are concerned, the CRA takes only the expenses related to business use into consideration.
Get In Touch With Us For Help Regarding Vehicle Expenses
It can be a little tricky to work out the vehicular expenses on your own by factoring in all the permutations and combinations. Let our business advisors in North York, Ontario help you with this.
When it comes to tax, timely action can save you time, hassle and money. Do not keep it unfinished for future. Reach out to us for help or assistance in this regard.