Under Canadian tax law, employees can write off the costs of repairs and maintenance work. Learn more about how this works and how you can save on your taxes.
Currently, Canada allows you to deduct the following motor vehicle expenses :
The short answer is, "yes, repair and maintenance costs are deductible" but you need to meet several criteria to be eligible for the tax deduction. Furthermore, you also need to keep careful records.
Abiding by Canadian tax law, employees and self-employed individuals who use their cars for business purposes can deduct a portion of their vehicle-related expenses - including repairs. Employees can also take advantage of the deduction even if they only use their vehicle for work part of the time. They merely have to work out the percentage is used for work, and they can deduct that percentage of their repair expenses. A repair is any service or maintenance work required to keep the vehicle in good working condition. It does not include enhancements or improvements that are not necessary to keep the car running. For example, new brakes fall under the category of repairs, but adding a new stereo or detailing does not. Making this distinction is essential to qualify for the deduction.
Deducting the costs for repairs and maintenance sounds good, but who is eligible for this deduction? And how do you know how much you can write off? According to the Canada Revenue Agency (CRA), you can deduct vehicle expenses, including repairs, if you meet ALL of the following requirements:
Here are some examples of the repairs you can deduct from your taxes:
You cannot deduct expenses for improvements and modifications that are not essential to maintain the vehicle in good working condition. Additionally, the deduction for the repair has to be taken the year the work is carried out. After that, it's no longer a valid deduction.
Canada's tax rules cover all eligible repair costs. There is no deduction limit on the amount spent on repairs. Furthermore, the allowable deduction is equal to the proportion for which the vehicle is used for business purposes. If 50 percent of the use is for legitimate work purposes, then 50 percent of the repair costs can be deducted. Thus, it is imperative to keep good records if you want to claim deductions successfully, which is what the CRA recommends.
Keeping meticulous records of your expenditures throughout the year is critical. The best way to do this is by recording your expenses as they occur rather than waiting until the last minute to avoid forgetting a payment or making a mistake. Having the right tool or smartphone app handy can help you with your record-keeping responsibilities.