Motor vehicle – Interest

You can deduct interest on the money you borrow to buy a motor vehicle or 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 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" of your form.

Example

Heather's business has a December 31 year-end. On January 1, 2018, 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 2018 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 2018 fiscal period)
  • $3,650 ($10 × 365 days)

Heather's records for her 2018 fiscal period:

Business kilometres
20,000 km
Total kilometres
25,000 km

Expenses:

Gasoline and oil
$2,000
Repairs and maintenance
$1,000
Insurance
$1,900
Interest (on loan to buy vehicle)
$2,200
Licence and registration
$60
Total vehicle expenses
$7,160

Heather determines the motor vehicle expenses she can deduct in her 2018 fiscal period:

20,000 (business kilometres) ÷ 25,000 (total kilometres) × $7,160 = $5,728

Heather can deduct $5,728 as motor vehicle expenses for her 2018 fiscal period.

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