Here are some of the top vehicle deduction tax facts in 2020 that can help you prepare better for tax season and save some dollars.
Tax season is still a little far off, but nothing makes taxes more painful than being unprepared, and you can take advantage of certain tax breaks if you keep good records of your spending throughout the year. Some of the few tax credits and deductions you should be aware of include:
- Vehicle deduction tax
- Family, childcare, and caregiver deductions
- Moving expenses
- Disability supports deduction
- Business investment loss
The purpose of tax deductions is to decrease your taxable income, thus decreasing the amount of tax you owe to the federal government, that’s why it’s important to stay up to date with such tax deductions, so you can take advantage of them come tax season.
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Motor Vehicle Expense Claims on Income Tax in Canada: What You Should Know
Did you use a vehicle for business purposes this past tax year? Then there are some motor vehicle expense claims that you can make on income tax in Canada. Before you do, you should understand that broadly speaking, there are 2 types of motor vehicle expenses when it comes to income tax in Canada:
- Those related to buying a motor vehicle
- Those related to the use of a vehicle
Working with an experienced tax accountant can help you better understand these motor vehicle expense claims and it can help you save on your taxes this year.
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Motor Vehicle Expenses You Can Claim Related to the Use of a Vehicle
When you use a vehicle to earn business income, then you are able to claim a number of things, including:
- Maintenance and repairs
- Insurance
- Leasing costs
- Fuel and oil costs
- License and registration fees
- Money borrowed to buy the vehicle
What happens if I use the vehicle for personal and business use?
As is almost always the case with income tax deductions, there is a catch to this. If you use the same vehicle for personal use, then you can only deduct the portion of the expenses above that are directly related to using your vehicle for earning income.
What does this mean? To claim motor vehicle expenses, you must know exactly how many kilometers you have driven for business reasons, and how many you have driven for personal use.
How To Keep Track Of Your Motor Vehicle Use
The Canada Revenue Agency (CRA) recommends that you keep a logbook of all your motor vehicle use throughout the tax year. In addition to this, you must keep all receipts to back up your claims for business expenses. It’s tedious, but if you want to claim something, you have to have a receipt for it.
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A strong tax plan can ultimately help you and your family save thousands of dollars in the future. You can rely on our Chestermere tax accountants to help you make the smartest and safest decision for your family and assist you with all your tax planning needs.
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