Motor vehicle – Leasing costs
You can deduct costs you incur to lease a motor vehicle you use to earn income. Include these amounts on:
- line 9281 for business and professional expenses
- line 9819 for farming expenses
- line 9281 for fishing expenses
When you use a passenger vehicle to earn farming or fishing income, there is a limit on the amount of the leasing costs you can deduct. To calculate your eligible leasing costs, fill in "Chart C – Eligible leasing cost for passenger vehicles" of your form.
If the lease agreement for your passenger vehicle includes such items as insurance, maintenance, and taxes, include them as part of the lease charges on amount 20 of Chart C.
Note
Generally, leases include taxes (GST/HST, or PST) but not items such as insurance and maintenance. You have to pay these amounts separately. Include the taxes on amount 20 of Chart C, and list the items like insurance and maintenance on the appropriate lines of "Chart A - Motor vehicle expenses."
For your 2022 fiscal period, use the GST rate of 5% or the applicable HST rate of your specific province to fill in Chart C.
The following example shows how to calculate the eligible leasing costs. Use Chart C of your form to help you understand the following example. In this chart, we use prescribed amounts. Prescribed means it is written in the law.
Example
On July 1, 2022, Meadow started leasing a car that is a passenger vehicle. She used the car to earn business income. Her business has a December 31 fiscal year‑end. The PST rate for her province is 8% and GST is 5%. Meadow entered the following for 2022:
Monthly lease payment
$500
Lease payments for 2022
$3,000
Manufacturer's suggested list price
$33,000
Number of days in 2022 she leased the car
184
Prescribed CCA capital cost limit
$34,000
Prescribed CCA capital cost limit × Prescribed limit rate: 34,000 × (100 ÷ 85)
$40,000
Prescribed deductible leasing costs limit
$900
GST and PST on $34,000
$4,420
GST and PST on $40,000
$5,200
GST and PST on $900
$117
Total lease charges incurred in 2022 fiscal period for the vehicle
$3,000
1
Total lease payments deducted in fiscal periods before 2022 for the vehicle
0
2
Total number of days the vehicle was leased in 2022 and previous fiscal periods
184
3
Manufacturer's list price
$33,000
4
The highest amount: line 4 or $45,200 ($40,000 + $5,200) × 85%
$38,420
5
($1,017 × 184) ÷ 30
$6,238
6
($38,420 × $3,000) ÷ $38,420
Meadow's eligible leasing cost is either amount 6 or 7, whichever amount is less. In this case, her allowable claim is $3,000.
Repayments and imputed interest
When you lease a passenger vehicle, you may have a repayment owing to you, or you may have imputed interest. If so, you will not be able to use the chart.
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 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 is more than $1,000
Forms and publications
- Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income
- Form T2125, Statement of Business or Professional Activities
- Form T2042, Statement of Farming Activities
- Form T2121, Statement of Fishing Activities
- Interpretation Bulletin IT-521R, Motor Vehicle Expenses Claimed by Self-Employed Individuals
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