Motor vehicle expenses

When can you deduct motor vehicle expenses?

You can deduct motor vehicle expenses in the following circumstances:

  • If you own one rental property – You can deduct reasonable motor vehicle expenses if you meet all 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
    • 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
    • manage the properties

This applies whether your rental properties are located in or outside the general area where you live. Your rental properties have to be located in at least two different sites, away from your principal residence. The motor vehicle expenses that we consider to be reasonable depend on the circumstances of your situation.

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?

Go to Type of vehicle you own or lease before calculating your deductible expenses.

Joint ownership

If you and somebody else own or lease the same passenger vehicle or zero-emission 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 one person owning or leasing the vehicle could deduct.

Business use of a motor vehicle or passenger vehicle (including zero-emission vehicles and zero-emission passenger vehicles)

If you use a motor vehicle or passenger vehicle for both earning rental income and for personal use, you can deduct only the part of the expenses you paid to earn 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, Self-employed Business, Professional, Commission, Farming, and Fishing Income.

Deductible expenses

The types of expenses you can deduct include:

  • fuel and oil cost
  • maintenance and repairs
  • insurance
  • licence and registration fees
  • eligible interest on money borrowed to buy a motor vehicle
  • eligible leasing costs

Interest expense

In the calculation of your motor vehicle expenses, you can deduct the interest on money you borrowed to buy a motor vehicle, a zero-emission vehiclepassenger vehicle, or a zero-emission passenger vehicle you use to earn rental income.

However, there is a limit on the amount of interest you can deduct when you use a passenger vehicle or zero-emission 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
  • $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)

Leasing costs for a passenger vehicle (or a vehicle that would qualify as a zero-emission passenger vehicle if you owned it)

You can deduct interest on the money you borrow 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, go to 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 at amount 19 when you complete the applicable chart.

Note

Generally, leases include taxes (GST/HST or PST), but not items such as insurance, maintenance, and taxes. You have to pay these amounts separately. Include them on line 19 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 leasing chart. Instead, contact us.

Imputed interest is interest that would be owing to you if interest were paid on the money you deposited to lease a passenger vehicle. Calculate imputed interest for leasing costs on a passenger vehicle only if all of the following apply:

  • one or more deposits were made for the leased passenger vehicle
  • one or more deposits are refundable
  • the total of the deposits are more than $1,000
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