1. Claiming deductions for medical and moving expenses.
For those living in Ontario, the rates are as follows:
2015 $0.55 2016 $0.54 2017 $ TBA
2. Limit on tax exempt allowances paid to employees.
2015 is $0.55 for the first 5,000 kms and $0.49 for each additional km
2016 is $0.54 for the first 5,000 kms and $0.48 for each additional km
2017 is $0.54 for the first 5,000 kms and $0.48 for each additional km
3. Self-employed individuals who use a vehicle to earn business income and employees who are required to use their own vehicle in the course of their duties may deduct reasonable expenses for operating the vehicle.
The Income Tax Act defines two types of vehicles:
- Passenger vehicles are vehicles designed to carry no more than nine passengers.
- Motor vehicles are vehicles that are not passenger vehicles. They may also be designed to carry no more than nine passengers.
The following types of vehicles are specifically included as motor vehicles:
- Motor vehicles acquired to be sold, rented or leased
- Vans that are used more than 90% of the time to transport goods
- Pick up trucks that are used more than 50% of the time to transport goods
- Extended cab pick-up trucks used primarily for the transportation of goods, equipment or passengers in the course of earning or producing income at a work site at least 30 kilometres from any community having a population of at least 40,000
- Busses used in the business of transporting passengers
- Hearses and other vehicles used in the transport of passengers in the course of a funeral
Motor vehicles are a class 10 asset while passenger vehicles are a class 10.1 asset.
Passenger vehicles have the following restrictions:
- Capital cost maximum remains at $30,000 plus GST and PST (less ITCs)
- Leasing cost maximum remains at $800 per month plus GST and PST (prorated if > $30,000
- Interest deduction remains at $300 per month
Expenses are generally considered reasonable if they are pro-rated between personal and business usage. This is done using a log. Vehicle expenses claimed, where no log has been kept, are at risk of being denied. There are many tax court cases supporting this notion.
Although there is a method of only keeping a log for part of the year, after the first year, I do not endorse it.
4. Employer supplied vehicles pose different tax issues. If the employer supplies a vehicle for the employee's use, and the employee has access to the vehicle for personal use as well, the employee will be assessed a taxable benefit in two parts.
The easiest part of the benefit is called the Operating Cost Benefit. This benefit is assessed if the employer pays costs related to operating the vehicle (i.e. gas, oil, insurance, maintenance, etc). The benefit in 2016 was calculated by charging $0.26 for every personal kilometer the vehicle is used (including HST).
The second component is called the Stand-by Charge. It is calculated as 2% of the purchase price of the vehicle, charged monthly, for every month the employee has access to the vehicle.
If the vehicle is leased, the Standby Charge is calculated as 2/3 of the monthly lease cost for each month the employee has access to it.
Reduction of Standby Charge
The reduced standby charge applies to the extent annual personal driving does not exceed 20,000 kilometres, and the automobile is used primarily - that is, more than 50 per cent - for business purposes.
The reduced standby charge is:
Regular Standby Charge X Personal Kilometres Driven
For example, where a vehicle is driven 25,000 kilometres a year for business and 15,000 kilometres a year for commuting and other personal driving, the standby charge will be 75 per cent (15,000 divided by 20,000) of the regular standby charge.
Using the above example, with a vehicle costing $30,000, the standby charge would be as follows:
$30,000 x 2% x 12 months x 75% = $5,400