Vehicles For Business

Vehicle Deduction Limits (2025)

For businesses and self-employed individuals using their vehicles for work, the CRA allows certain deductions based on vehicle expenses. These can include fuel, maintenance, insurance, leasing costs, and depreciation (capital cost allowance or CCA) for owned vehicles. The limits on what you can claim depend on the type of vehicle, how it’s used, and whether it’s considered a personal or business expense.

Capital Cost Allowance (CCA) Limits:

When claiming depreciation on a vehicle, the CCA class depends on the type of vehicle. For example:

• Passenger vehicles: The CCA class for most passenger vehicles is Class 10 or Class 10.1.
  • For vehicles costing $30,000 or less (before tax), you can claim 15% of the vehicle’s cost each year as a depreciation expense.
  • If the vehicle exceeds $30,000 (before tax), you may only claim a portion of the depreciation expense based on the $30,000 limit. This applies even if you pay more for the vehicle.
  • Luxury vehicles with a cost exceeding $30,000 are subject to limited CCA claims. The maximum eligible amount for depreciation is typically set at $30,000 for vehicles bought after 2017.

Leasing Costs for Vehicles:

If you lease a vehicle for business, the CRA limits the amount you can deduct:

• For vehicles costing more than $30,000, the maximum monthly lease cost deductible is $800 (before tax).
• For passenger vehicles with lower lease costs, the entire lease payment can be deductible as long as the vehicle is used for business purposes.

Fuel and Operating Costs:

You can also claim a portion of your fuel, maintenance, and operating costs based on the business-use percentage of the vehicle.

• For example, if you drive 60% of the time for business, you can claim 60% of the fuel, maintenance, and other operating expenses as business expenses.

Changes for 2025:

While the basic vehicle deduction limits (such as the $30,000 limit for depreciation) have not drastically changed, there may be minor adjustments for inflation. The CRA typically updates these limits annually, but there have not been any major changes to vehicle deduction limits for 2025 specifically announced yet. Here are key updates to watch for in 2025:

• Inflation Adjustments: The $30,000 cap for vehicles may increase slightly for inflation. These adjustments are often seen in tax guidance released by the CRA or in the annual federal budget.
• Luxury Vehicle Depreciation: There’s a chance that luxury vehicle tax rules may evolve, especially for high-end or electric vehicles.
• Hybrid and Electric Vehicles: The CRA has offered certain incentives for electric vehicles (EVs) or plug-in hybrid vehicles in the past. If you use an EV for business, check if any special tax benefits or rebates apply to the vehicle purchase or lease.

4. Key Considerations When Claiming Vehicle Deductions:

• Business Use Percentage: The amount you can deduct depends on how much the vehicle is used for business purposes versus personal use. Accurate records (like a logbook) are essential to demonstrate the business-use percentage.
• Keep Receipts: For any vehicle-related expenses, keep detailed receipts, including for fuel, repairs, maintenance, and leasing costs. The CRA requires this documentation to substantiate your claims.
• Home Office Deduction: If you’re working from home and using your vehicle for business, you may also be eligible to claim a home office deduction alongside vehicle expenses.

Further Resources

Additional information on the variety of Savings and Pension plans can be found on the CRA website using the following links:

Classes of depreciable properties

Motor Vehicle Expenses

Contact Us

The team at Monika Gupta CPA Professional Corp is here to provide expert guidance and support on navigating the complexities of Savings and Pension Planning. Should you require further assistance or information, feel free to reach out to us at info@cpamg.ca or call us at +1 416-748-1329.