Professional vehicles: Make the choice that’s right for you

Most Canadians use their vehicles to get to work in the morning, do their shopping and otherwise travel short distances. Structuring and limiting how you use your car is a great way to save on gas and maximize its useful life. However, if you have to use your vehicle as part of your work, it’s a different story.

Are you self-employed or employed by a company and need a vehicle to do your work? Are you wondering if some of your vehicle expenses related to this use are tax deductible?

• If you’re self-employed, you can deduct vehicle-related expenses based on the percentage of business use for the year based on mileage travelled. Eligible expenses include gas, electric vehicle charging, maintenance and repairs, insurance premiums, registration fees and the cost of a driver’s licence. Depending on the tax limits for your use of the vehicle for the year, you may be able to claim other expenses, such as interest paid on the loan used to purchase the vehicle, leasing costs and capital cost allowance if you own the vehicle.
• If you’re employed by a company, your employer may pay you a tax-free allowance based on a rate per kilometre driven with your personal vehicle for the purposes of your job. Another option would be to give you a taxable allowance. In this case, you can deduct eligible vehicle-related expenses depending on your situation and the percentage of time used for employment purposes. If the non-taxable allowance you receive doesn’t fully cover the vehicle costs, you can choose to include it in your income and deduct these expenses, under certain conditions. Your employer will need to give you copies of forms T2200 and TP-64.3 (Quebec only), which describe your employment conditions, including the use of your vehicle for work-related functions.

In any case, remember to keep a record of your trips so you can justify the amount you deduct.

Are you starting a business and looking to buy a vehicle? First, note that buying a vehicle for business purposes isn’t subject to the same rules as for personal use.

• In Quebec, a commercial vehicle can only be legally purchased by a company listed in the Enterprise Register.¹ The vehicle will have a licence plate number that starts with the letter F, which identifies that it is for commercial use. The vehicle must be 3,000 kilos or less, otherwise it must be registered as a tool vehicle (like an excavator or grader).
• If the company is the legal owner of the vehicle, it must also assume the risks, even if it’s used by a staff member. Legally, a company must be insured for at least $50,000 in civil liability coverage. There are specialized auto insurance policies for commercial vehicles that allow for their free use for business purposes. Many insurers also offer discounts* to clients who have multiple policies with them, so feel free to ask if you’re eligible.
• Purchasing a commercial vehicle can give a company more flexibility in how it operates. For example, the vehicle can be used to drive to a client’s home or pick up merchandise. However, if an employee uses a vehicle provided by their employer for personal purposes, a taxable benefit needs to be calculated. This is based on the right of use and operating expenses, based on the number of kilometres travelled personally. The person must keep a record of the trips made with the vehicle and give a copy to their employer.

To find a vehicle that suits you best, we recommend first identifying your short- and long-term needs. This will give you a good idea of what the purchase involves and what you’ll get out of it.

1. https://saaq.gouv.qc.ca/en/vehicle-registration/registering-vehicle/commercial-or-special-use-vehicle/commercial-vehicle

* Certain conditions, limitations and exclusions may apply. Offers and discounts are based on each client’s individual profile and are subject to eligibility conditions.