Trucks and Taxes Can be a Nightmare for Business Owners – Get Advice From a CPA Before You Visit the Dealer

We all love trucks and so does CRA. Owning a truck makes you a possible target for one of CRA’s favorite audits. Before you visit the dealer make sure you visit your accountant first.

Vehicles are on of the most expensive assets which a business uses, and a necessity for most, but the inclination to enjoy the use of work vehicles after hours led CRA to impose some very restrictive rules which affects vehicles used less than 50% or less than 90% of the time for transporting goods, equipment  and passengers.

With any vehicle it is important to use a mileage tracker, now available as an App. QuickBooks has one that imports directly into the accounting program. If you do not have a record of all of your business travel, do not expect an auditor to be understanding. In fact they will disallow most of the expenses associated with the truck.

Travel to your place of business is a personal expense (except under certain exceptional circumstances). This is important for employees, the self-employed and shareholders and their families.

The amount that can be written off for a truck is limited unless it is one of the following:

a van, pick-up truck, or similar vehicle that seats no more than the driver and two passengers which, in the tax year you bought or leased, was used more than 50% to transport goods and equipment to earn income

a van, pick-up truck, or similar vehicle that, in the tax year you bought or leased, was used 90% or more to transport goods, equipment, or passengers to earn income

If you purchase a $80,000 crew cab and fail to meet the 90% test, HST/GST input tax credits that can be claimed will be limited to tax on $30,000. Depreciation that can be claimed as capital cost allowance will also be limited and on top of that you will be assessed a taxable benefit which will be added to your personal income.

Be informed, visit a CPA first.