Taxes
What Tax Form Do You Use to Deduct Motor Vehicle Expenses?
You can claim motor vehicle expenses on your taxes for a deduction. Here's how to do it, as well as what tax forms you should be using.
Who Can Deduct Motor Vehicle Expenses?
The self-employed can deduct their motor vehicle expenses on their income tax return. The CRA knows there's a cost associated with using a personal car for business reasons, so it allows people to write off some of those costs. This is similar to how it allows self-employed to deduct other business expenses.
How Much Are My Motor Vehicle Expenses Worth On Taxes?
It depends on how much you drive for your business. Needless to say, this can lead to a major impact on your taxes. Remember, the more deductions you have, the lower your taxable income is and that leads to lower taxes paid.
How Do I Calculate My Motor Vehicle Expense Deduction?
You can calculate motor vehicle expenses by using the following formula:
- (Business kilometres / total kilometres for the year) X Total motor vehicle expenses = Motor Vehicle Expense Deduction
Your total motor vehicle expenses include things like the cost of licenses, insurance, gas and oil, repairs and more. For example: If you spent $5,400 on your car and drove 40,000 kilometres with 32,000 business kilometres, your deduction would be $4,320. For the above formula, this would be: (32,000/40,000 x $5,400 = $4,320.
