Many businesses use the per-kilometre rates found in the appropriate section of the Income Tax Regulations. To determine if your car allowance is reasonable, the CRA takes into consideration the type of vehicle and the driving conditions. If you don’t reimburse the employee, they may be able to claim a deduction on their income taxes. You should include this benefit on the employee’s T4 slips as a taxable benefit. The allowance isn’t taxable if it’s reasonable under the circumstances and based on per-kilometre calculation. Your company can reimburse an employee for using a personal car for business purposes in the form of a motor vehicle allowance. Using a Personal Car for Business Purposes Once you know the applicable rules, you can do the math and make an educated decision. In both cases, the answer comes down to which option offers more advantages from a tax standpoint. On top of deciding how you want to claim your tax deduction, you need to decide whether or not you should use personal vehicles as part of your business or purchase a company car that’s only for business purposes. The Canada Revenue Agency (CRA) allows you to write off the use of a vehicle for your business. Using a vehicle for your business represents one financial aspect of running your company that deserves a closer look. As a small business owner, you’re always looking for ways to maximize profits and make your company run as efficiently as possible.
