Motor vehicle expenses
On this page, you will find information on the following:
When can you deduct motor vehicle expenses?
You can deduct motor vehicle expenses in the following circumstances on:
- If you own one rental property - You can deduct reasonable motor vehicle expenses if you meet all the following conditions:
- you receive income from only one rental property that is in the general area where you live;
- you personally do part, or all, of the necessary repairs and maintenance on the property; and
- you have motor vehicle expenses to transport tools and materials to the rental property.
You cannot deduct motor vehicle expenses you incur to collect rents. These are personal expenses.
- If you own two or more rental properties -In addition to the expenses listed above, you can deduct reasonable motor vehicle expenses you incur to do any of the following:
- collect rents;
- supervise repairs; and
- generally manage the properties
This applies whether your rental properties are located in or outside the general area where you live. However, your rental properties have to be located in at least two different sites away from your principal residence.
You can deduct motor vehicle expenses only when they are reasonable and you have receipts. You also have to keep records of the kilometres you drove for your rental properties and the total kilometres you drove in the year. You must also determine the total expenses paid for the vehicle in the year. For more information, visit Keeping records.
What type of vehicle do you own or lease?
See Type of vehicle you own or lease before calculating your deductible expenses.
If you and somebody else own or lease the same passenger vehicle, the limits on capital cost allowance, interest, and leasing costs still apply. The total amount the joint owners can claim cannot be more than the amount that would be allowed if only one person had owned or leased the vehicle.
Personal use of a motor vehicle
If you use a motor vehicle (including passenger vehicle) for both earning rental income and for personal use, you can deduct only the percentage of expenses related to earning the rental income. To support the amount you can deduct, keep a record of both the total kilometres you drove and the kilometres you drove to earn rental income.
If you use more than one motor vehicle to earn rental income, calculate each vehicle's expenses separately.
For information on how to calculate the motor vehicle expenses that you can deduct, see Guide T4002, Business and Professional Income.
The types of expenses you can deduct include:
- fuel and oil;
- maintenance and repairs;
- licence and registration fees;
- eligible interest you paid on a loan used to buy the motor vehicle; and
- eligible leasing costs.
However, there is a limit on the amount of interest you can deduct when you use a passenger vehicle to earn rental income. The amount of interest you can deduct is limited to the lesser of the following two amounts:
- Total interest payable for the year; and
- $10 × the number of days for which interest was payable in the year (use $8.33 for passenger vehicles bought between December 31, 1996, and January 1, 2001).
You can deduct amounts you paid to lease a motor vehicle you used to earn rental income. Include the leasing costs you paid when you calculate your allowable motor vehicle expenses.
If you use a passenger vehicle to earn rental income, there is a limit on the amount of the leasing costs you can deduct. For more information, see Chart to calculate eligible leasing costs for passenger vehicles.
If the lease agreement for your passenger vehicle includes items such as insurance, maintenance, and taxes, include them as part of the lease charges on line 1 when you complete the applicable chart.
Most leases do not include items such as insurance, maintenance, and taxes. Therefore, you have to pay these amounts separately. Do not include them on Line 1 when you complete the applicable chart.
Repayments and imputed interest
When you lease a passenger vehicle, you may have either a repayment owing to you, or you may have imputed interest. If this is your situation, you cannot use the preceding leasing chart. Instead, contact us.
Imputed interest is interest that would be owing to you if you were paid interest on money you deposited to lease a passenger vehicle. You can only calculate imputed interest for leasing costs on a passenger vehicle if all the following apply:
- you made one or more deposits for the leased passenger vehicle;
- all deposits are refundable; and
- the deposits total more than $1,000.
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