Individuals who lease a passenger vehicle for work-related purposes can deduct part of their leasing costs on their tax return. That being said, there is a limit on the amount you can claim. This limit is based on a calculation involving your lease payments and the value of your car.
How to calculate your car lease deduction?
Leasing a car offers some distinct advantages when it comes to tax deductions. To determine the amount of your car lease deduction, you need to know the following:
- The total lease charges you paid during the tax year
- The total lease payments deducted before the current tax year for your vehicle
- Number of days the vehicle was leased during the current tax year and in previous tax years
- Manufacturer’s suggested list price for the vehicle
- The GST and PST rates for your province.
Deductible leasing costs increased from $950 to $1050 per month, before tax, for new leases entered into on or after January 1, 2024. Please note it is the year in which a lease is entered, and not the year in which the lease payments are made that determines the lease limit.
Vehicle expenses beyond lease payments you can deduct
The leased car’s realm doesn’t solely revolve around lease payments. There’s a spectrum of associated costs, and understanding which ones can be claimed is crucial for maximizing deductions. You can deduct expenses you incur to run a motor vehicle that you use to earn business income.
The types of expenses you can claim on “Line 9281 – Motor vehicle expenses (not including CCA)” of Form T2125 or Form T2121, or line 9819 of Form T2042 include:
- licence and registration fees
- fuel and oil costs
- electricity costs for zero-emission vehicles
- insurance
- interest on money borrowed to buy a motor vehicle
- maintenance and repairs
For all your corporate tax needs contact DM Tax Accountants in Surrey, BC. Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, we can use our experience and expertise to make tax time a breeze. Contact us to request a consultation.