Motor vehicle – Interest
You can deduct interest on the money you borrow to buy a motor vehicle, zero-emission vehicle, passenger vehicle, or a zero-emission passenger vehicle you use to earn business, professional, farming or fishing income. Include the interest as an expense when you calculate your allowable motor vehicle expenses.
When you use a passenger vehicle or a zero-emission passenger vehicle to earn income, there is a limit on the amount of interest you can deduct. To calculate the interest you can deduct, fill in "Chart B – Available interest expense for passenger vehicles and zero-emission passenger vehicles" of your form.
Heather's business has a December 31 year-end. On January 1, 2020, she bought a new passenger vehicle that she uses for both personal and business use. She borrowed money to buy the vehicle, and the interest she paid in her 2020 fiscal period was $2,200. Since the car that Heather bought is a passenger vehicle, there is a limit on the interest she can deduct.
Heather's available interest is the lesser of the following amounts:
- $2,200 (the total interest she paid in her 2020 fiscal period)
- $3,650 ($10 × 365 days)
Heather's records for her 2020 fiscal period:
Heather determines the motor vehicle expenses she can deduct in her 2020 fiscal period:
Heather can deduct $5,728 as motor vehicle expenses for her 2020 fiscal period.
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