# vehicle, business use, current vs capital expenses



## joncnca (Jul 12, 2009)

this page outlines current vs capital expenses for properties

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/rntl/crcp-eng.html

is there some similar guideline for vehicles?

for instance, i read in a thread once that some argue winter tires are a capital expense, others consider it maintenance. what if it's a second set to replace a worn set? things like that...or is it just left up to us to use our judgement and hopefully they agree with our logic if we ever get audited/requested for info?


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## Synergy (Mar 18, 2013)

Take a look at the Table on page 6
http://www.pwc.com/ca/en/tax/publications/pwc-tax-guide-car-expenses-benefits-2014-02-10.pdf

Minor repairs and mainteance items would be considered operating expenses. New replacement tires would be considered a maintaince item IMO. Other maintenance items would include things like brake repairs, oil changes, fluids, etc. There would be some grey areas between what the CRA considers minor (operating expense) versus major repairs (capital cost). A minor repair would likely be something like a new muffler, replaced radiator, etc. while a major repair might be a new or rebuilt $6500 transmission. That would be my guess.

A new set of winter tires would likely fall under maintenance but I can see how some might view it as a capital cost. This would be worth confirming with an accountant or tax professional.

The CRA doesn't appear to give great examples for auto expenses.


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## domelight (Oct 12, 2012)

joncnca said:


> this page outlines current vs capital expenses for properties
> 
> http://www.cra-arc.gc.ca/tx/bsnss/tpcs/rntl/crcp-eng.html
> 
> ...


 Expense vs. improvement is actually very simple. Just ask your self is it better then what was originally there in its original state. here are a couple of examples.

1. a Building built in 1950 had a wooden roof. Now sixty some year's later you put on another wooden roof, that is the same quality wood that was originally there in 1950. This is a repair.
--lets say you put a steel roof on the building, then that is an improvement.

2. Lets say you blow the engine on a ten year old car and the car had a 3.1 liter engine. as long as you replace it with a similar or lower quality engine, it is a repair regardless of cost. 
-- However if you put a a 3.8 liter engine in the vehicle then that is an improvement.

Defining a repair vs. an improvement is way to often related to cost, when it should solely be related to original quality of what is being replaced.

Let's say your did replace an engine and spent $ 6,000. CRA will usually try to say the this is a capital improvement, however if it meets the guidelines above then you are within the ITA to claim it as an expense. Should they question you don't be afraid to challenge them, ask them to show you the section of the act that applies and argue your position.

P.S. Winter tires are an expense as they do not individually improve the overall quality of the vehicle in its original state.


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## joncnca (Jul 12, 2009)

thanks, guys.

i'll try and keep to some of those guiding principles and see if it gets me through everything that comes up.


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