How to Claim Your Business Vehicle Lease During Tax Season

By: Quest Automotive Leasing   |   01 Dec 2021
Papers and folders for an accountant

There are many benefits of commercial fleet leasing for small businesses (seriously, just take a look at a few of our top leasing perks here), but did you know that there are also benefits to leasing your fleet vehicles when tax season rolls around?

Many business owners don’t know that you can write off your lease (and many of the associated expenses, like gas, parking, and repairs) as a business expense, potentially saving your company thousands of dollars. At Quest, we’re here to represent our clients and help them enjoy as many leasing-related perks as possible. In this article, we’ll talk about a few ways you can best leverage your lease during tax time.

Calculating Your Vehicle Leasing Deduction

In Canada, you can claim “a portion, if not all” of your business’ vehicle lease payments on your taxes. The limit on a monthly lease payment per vehicle is $800 per month + HST, up to a maximum of $9,600 in deductions per leased vehicle. Depending on your lease, this is a significant figure and can cover the majority of your fleet leasing payments.

There are other deductible options available to small businesses that you can explore with your bookkeeper, accountant, or here at Quest Auto with your personal finance expert. For example, you can choose whether you want to deduct your lease costs (as outlined above) or your standard mileage rate for the business miles driven. Depending on your overall expenses and the type of business you manage, there may be different benefits to each option. Note that you can not simultaneously deduct both of these options.

“If you buy a car for business purposes in Canada, you will be able to claim the Capital Cost Allowance (CCA), which is a vehicle depreciation deduction. That being said, CCA only lets you claim part of the value of your car each year.  When you lease a car, however, things are a bit different. If you use your car for business purposes all of the time, you may be able to deduct 100% of your lease payments for tax purposes. In other words, from a tax perspective, leasing a new car can be more beneficial than buying a brand-new car at the end of the year.”

Mile IQ

Additional Leasing Considerations

There are so many considerations when it comes to business lease deductions in Canada. Everything from the type of business you own (i.e. general, farming, fishing), to the size of your vehicles (i.e. Chart A motor vehicle, Chart C passenger vehicle), to the manufacturer's suggested list price, to your taxes and insurance, to the fiscal year - there are many factors that will impact your overall tax deductions. There are some helpful articles from the Canadian Revenue Agency designed to help small business owners that are worth looking over, such as this one about Motor Vehicle Leasing Cost Deductions for Business Owners.

Quest Automotive is Here to Guide You Through the Perks of Vehicle Leasing for Small Businesses

Here at Quest, we have the experience and resources to support your business with flexible and affordable fleet leasing options. We don’t want to see you get stuck with vehicles you don’t need, or not reap the full benefits of leasing your fleet. Our team is here to walk you through the many perks of commercial fleet leasing that exist for Canadian business owners during tax season and beyond. Don’t hesitate to reach out to our team to discuss your options. No matter your situation, we are here to support you every step of the way.

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