Do you use the vehicle for at least 90% of the time for business?
If not, then please have your corporation write you a cheque for a tax-free mileage reimbursement for the use of your personally owned vehicle. In this case, do not pay for any vehicle-related expenses through your corporation. Pay for all vehicle-related expenses personally and write yourself the tax-free mileage reimbursement each month.
Click here for the current year’s rate.
If you do, and you have a mileage log to prove you use your vehicle at least 90% of the time for business (NOT INCLUDING TO AND FROM HOME/WORK) then you can buy ANY vehicle under $30,000, and lease any vehicle for under $800/month. Some business owners lease vehicles for under $800/month until the buy-out is under $30,000.
Taxable benefits for the personal use of corporate vehicles used less than 90% of the time for business make both leasings and buying unadvisable. Vehicles that will cost you less than the mileage reimbursement will be efficient at hauling as much cargo as required (efficiency here refers to the aggregate of hauling capacity, fuel efficiency, and drag coefficient). Remember do not choose the full-size version unless it will be 100% full at least 80% of the time.
Business Vehicles that do not require a taxable benefit to be reported
- Mercedes-Benz Metris Cargo Van, Sprinter Cargo/Chasis
- Ram Promaster, Promaster City, Chasis
- Ford Transit Connect, Transit, Transit CC-CA
- Chevrolet City Express, Express Cutaway
- Nissan NV Cargo, Frontier
- Toyota Tacoma
Heavy-Duty Vehicles that do not require a taxable benefit to be reported
- GMC W4500
There are 2 possible sources to trigger the post-assessment review (the precursor to the audit)
- When we file the corporate tax return the financial statement will have an account like “Equipment rental” and certain industry codes have an expected equipment rental amount. For example, salons have 0.
- There is also a schedule for non-leased assets which is schedule 8 and they ask the details of additions to Class 10 (vehicle code) especially if they are over $30,000.
- CRA has access to registry data and conducts post-assessment reviews to see how vehicles are being accounted for.
Protip: White vehicles are statistically the least involved in accidents. While the darker the color the higher it is statistically involved in accidents. Black is statistically the most involved in accidents.
- If you purchase a commercial van/truck, the write-off stems from CRA’s prescribed depreciation rate of 30% of the COST. This way you save the most in the early years of ownership and less and less as its worthless and less for tax purposes. Keep in mind CRA’s requirements are much stricter than the IRS so much of the information on the internet is NOT applicable. The smartest thing for you to do is to FINANCE the purchase at a low rate so that you don’t miss out on the opportunity cost of forking over a chunk all at once.
- Leases reduce your taxes by each lease payment so the write-off matches the payment and spreads it evenly over the term, and in some cases gives you optionality (which you pay for) in returning the lease.