A list of tax deductions or credits to consider in the upcoming tax season
Produce a T2200 which indicate that motor vehicle expenditures were requirements of employment with records such as repair receipts
In a September 17, 2019 Tax Court of Canada case, at issue was the deductibility of vehicle expenses, and in particular, the portion of total vehicle use that was for employment purposes. While initially challenged by CRA, the Court eventually accepted the credit card statements as support for the amounts expended. The taxpayer held and produced a T2200 which indicated that motor vehicle expenditures were requirements of employment.
Taxpayer loses – vehicle expenses
The taxpayer had initially claimed 90% employment usage but later asserted that only 1,015 of her total 1,353 kilometres travelled (75%) were for employment purposes. This percentage is used to determine the portion of total vehicle expenses that can be deducted. The Court then noted that the total kilometres driven for the year were more likely approximately 10,000 based on the odometer readings listed on the third-party garage repair invoices provided throughout the year. As the reported employment kilometres (which were supported by a vehicle log) were about 10% of the total reported on the invoices, only 10% of expenses were allowed.
ACTION ITEM: In addition to employment/business travel logs, CRA may ask for support of total travel. Retain records that support total kilometres traveled such as repair receipts.
Transport Canada released details on the purchase incentive of up to $5,000 for zero-emission vehicles as originally proposed in the 2019 Budget
On April 17, 2019, Transport Canada released details on the purchase incentive of up to $5,000 for zero-emission vehicles as originally proposed in the 2019 Budget.
The incentive will apply to new purchases or leases on or after May 1, 2019. To receive the incentive, the manufacturer’s suggested retail price must be less than $45,000 for vehicles with six or fewer seats, while a vehicle with seven or more seats must have a suggested retail price of less than $55,000. Higher priced versions (trims) up to $55,000 (six or fewer seats) or $60,000 (seven or more seats) will also qualify. Delivery, freight and other fees, such as vehicle colour and add-on accessories, which push the actual purchase price over these limits will not result in the incentive being lost.
The full $5,000 incentive will be available for eligible battery electric, hydrogen fuel cell, or longer range plug-in hybrid vehicles (battery capacity of 15 kWh or more), while shorter range plug-in hybrid vehicles will be eligible for a $2,500 incentive.
Leases of 48 months or more qualify for the full incentive, with reduced amounts available for shorter leases. It will be reduced to 75% for a minimum 36-month lease, 50% for a minimum 24-month lease, or 25% for a minimum 12-month lease.
The purchase incentive will be applied at the point of sale (i.e. at dealerships or online) directly on the bill of sale or lease agreement of eligible vehicles.
The dealership is responsible for completing the documentation required to receive the incentive. Claims can be submitted through the Transport Canada online portal. Funding will be provided on a first-come, first-serve basis.
Individuals can only get one incentive per year. Businesses (including NPOs and provincial, territorial and municipal governments) can get up to ten incentives per year.
As an alternative to receiving the cash incentive, a temporary enhanced first-year capital cost allowance (CCA) rate of 100% may be claimed by those using the vehicle for income earning purposes. Specific restrictions and conditions apply. The deduction may be restricted to the first $55,000 in cost depending on the size, seating, and use of the vehicle.
ACTION ITEM: Review the Transport Canada website to determine if a future vehicle purchase would be eligible. The website includes a list of eligible vehicles and responses to frequently asked questions. https://www.tc.gc.ca/en/services/road/innovative-technologies/zero-emission-vehicles.html