# Taxation rules for motor vehicles



## imaginenewmedia (Apr 4, 2012)

I purchased a new car for $30000 plus tax in December of 2011. I use it about 10% for personal use, 20% for a small business that I own, and 70% for a job in sales and customer service that requires that I drive about 1000-1500 km a week visiting different schools in the Greater Toronto area. I generally work out of my home, visiting my employers location two or three times a week. I do not have an office there.
My employer pays me a fixed(very small) vehicle allowance of $400 every two weeks (that works out to about 16 cents/ per kilometre) I keep mileage logs and receipts for everything, and my employer has agreed to sign a T2200.
As far as claiming tax deductions, I know I have to split personal, business and employment expenses. 
For the business part I believe I can claim 20% (my business use of the vehicle) of all expenses including repairs, gas, oil changes, tires, depreciation, insurance, interest etc.

For my employment use (70%), there seems to be two methods. One would be the same as for my business, claiming 70% of my vehicle expenses, the other is a simplified method which is something like 55 cents/km for the first 5000 km and something less for anything above that.

Are there any guidelines (other than minimizing my taxes!) that would decide which method I should use?

Even though my employer pays me a small vehicle compensation, is it ok to use either of the above methods if I claim the compensation paid to me as income?

Also, I already claim part of my home expenses (pro rated hydro, gas, internet, insurance etc.) for my small business. Can I claim pro rated expenses for the the work I do mainly at home for my employer?
Thanks


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## domelight (Oct 12, 2012)

imaginenewmedia said:


> I purchased a new car for $30000 plus tax in December of 2011. I use it about 10% for personal use, 20% for a small business that I own, and 70% for a job in sales and customer service that requires that I drive about 1000-1500 km a week visiting different schools in the Greater Toronto area. I generally work out of my home, visiting my employers location two or three times a week. I do not have an office there.
> My employer pays me a fixed(very small) vehicle allowance of $400 every two weeks (that works out to about 16 cents/ per kilometre) I keep mileage logs and receipts for everything, and my employer has agreed to sign a T2200.
> As far as claiming tax deductions, I know I have to split personal, business and employment expenses.
> For the business part I believe I can claim 20% (my business use of the vehicle) of all expenses including repairs, gas, oil changes, tires, depreciation, insurance, interest etc.
> ...


1. for the 20% business use your calculations are correct.
2. For the 70% you will need to calculate the 70% of vehicle expenses as stated above and then reduce the claim by the mileage allowance you receive.
3. The 53 cents for the first 5,000 km and then 47 cents thereafter is available to corporations and partnerships (Not proprietorships) as a non taxable mileage allowance. Paid to individuals who use their personal vehicle's for business purposes. This is the maximum amount you can claim without incuring a taxable benefit. However you cannot pay it to yourself as a proprietorship. and should proceed as in points one and two above. 

With regards to your Home office for your employer, it would depend whether your T2200 stated you require an office. CRA's definition is that you perform more than 50% of your work from home. in order to be a legitame claim.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/229/cmmssn/hm-eng.html


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## sprocket1200 (Aug 21, 2009)

also talk to your accountant about how much home office you can claim. after, i think it is 50%, it hurts your personal residence exemptions.


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