Corporate Vehicle Expense Deductions for the 2024 Tax Year

A Guide to Maximizing Them for Ontario Business Owners

As for many, their tax filing deadline approaches, Ontario business owners are busy organizing their financial records and looking for ways to maximize their deductions. One area that often holds significant potential for savings is corporate vehicle expense deductions.

Whether you use a vehicle for client meetings, deliveries, or other business-related activities, understanding the specific rules for the 2024 tax year can help you save money while staying compliant with the Canada Revenue Agency (CRA).

At KKCPA, we specialize in helping businesses navigate complex tax regulations and we know how important it is to make the most of every deduction available. In this blog post, we’ll dive into the specifics of corporate vehicle expenses for the 2024 tax year, including the growing trend of electric and hybrid vehicles, the deductions you can claim, and actionable tips to ensure you’re maximizing your savings.

Why Corporate Vehicle Expense Deductions Matter for Your Business in 2024

For many businesses, vehicles are an essential part of operations. Whether you’re a medical practice owner with staff making house calls, a contractor transporting equipment, or a retail business delivering products to customers, vehicles play a critical role in your success. However, the costs associated with owning and operating a vehicle—such as fuel, maintenance, insurance, and depreciation—can add up quickly.

The good news is that many of these expenses are tax-deductible, provided they are used for business purposes. By understanding the rules and keeping accurate records, you can turn these expenses into valuable tax savings for the 2024 tax year.

Understanding Corporate Vehicle Expenses for the 2024 Tax Year

The CRA allows businesses to deduct expenses related to the use of a vehicle for business purposes. However, the rules can be complex, and it’s essential to ensure you’re following them correctly to avoid penalties or audits. Here’s a detailed breakdown of what you need to know for the 2024 tax year:

1. Eligible Corporate Vehicle Expense Deductions for 2024

The following expenses are typically deductible for corporate vehicles in 2024:

• Fuel Costs: The cost of gasoline, diesel, or other fuels used for business purposes.
• Maintenance and Repairs: Expenses for oil changes, tire replacements, brake repairs, and other routine maintenance.
• Insurance: Premiums for vehicle insurance.
• Licensing and Registration: Fees for vehicle registration and licensing.
• Lease Payments: If you lease a vehicle, a portion of the lease payments may be deductible.
• Interest on Vehicle Loans: If you financed the purchase of a vehicle, the interest on the loan may be deductible.
• Depreciation (Capital Cost Allowance): You can claim a portion of the vehicle’s cost as a depreciation expense over time.

2. Personal vs. Business Use

One of the most critical aspects of claiming vehicle expenses is distinguishing between personal and business use. The CRA only allows deductions for expenses related to business use. If you use a vehicle for both personal and business purposes, you’ll need to calculate the percentage of business use and apply it to your expenses.

For example, if you use your vehicle 70% for business and 30% for personal use, you can only deduct 70% of your vehicle expenses.

3. Record-Keeping Requirements for 2024

To support your claims, the CRA requires detailed records of your vehicle expenses and usage. This includes:

• A logbook tracking the date, destination, purpose, and kilometres driven for each business trip.
• Receipts and invoices for all vehicle-related expenses.
• Documentation of the total kilometres driven during the year (both business and personal).

4. Simplified Method for Vehicle Expenses in 2024

If keeping a detailed logbook seems overwhelming, the CRA offers a simplified method for claiming vehicle expenses. Under this method, you can claim a flat rate per kilometre for business use, up to a maximum of 5,000 kilometres per year. For 2024, the rate is $0.70 per kilometre.

While this method is easier, it may not provide the same level of savings as the detailed method, especially if your business use exceeds 5,000 kilometres or your expenses are high.

Electric and Hybrid Vehicles: Special Considerations for 2024

With the growing emphasis on sustainability and the increasing availability of electric and hybrid vehicles, many businesses are making the switch. If your business owns or leases an electric or hybrid vehicle, there are additional tax considerations and incentives to be aware of for the 2024 tax year.

1. Capital Cost Allowance (CCA) for Electric and Hybrid Vehicles

The CRA offers enhanced Capital Cost Allowance (CCA) rates for zero-emission vehicles, including electric and hybrid vehicles. For 2024, the CCA rate for eligible zero-emission vehicles is 30%, compared to the standard rate of 15% for most passenger vehicles.

This means you can deduct a larger portion of the vehicle’s cost as a depreciation expense, providing significant tax savings over time.

2. Charging Station Costs

If your business installs a charging station for electric vehicles, the costs may be eligible for tax deductions. This includes the cost of purchasing and installing the charging station, as well as any related electrical upgrades.

3. Fuel Savings

Electric and hybrid vehicles can significantly reduce fuel costs, which can translate into lower overall vehicle expenses. While electricity costs for charging are not explicitly deductible, they can be factored into your overall vehicle expense calculations.

Note: If you are wondering why we have not mentioned the Federal Goverment’s iZev Program, which previously rewarded companies for purchasing these vehicles, that is because it is currently paused. Should it resume in the future, KKCPA will ensure its clients are made aware.

Tips for Maximizing Your Corporate Vehicle Expense Deductions in 2024

To ensure you’re making the most of your corporate vehicle expense deductions for the 2024 tax year, consider the following tips:

Maintain Accurate Records

Keep a detailed logbook and save all receipts and invoices related to your vehicle expenses. This will make it easier to calculate your deductions and provide documentation in case of a CRA audit.

Consider using apps or software to track your business mileage automatically. This can save time and reduce the risk of errors. Driver’s Note is a good (Canadian owned) option, especially as some of the plans also include a physical beacon that continues to log mileage independently of user input.

Separate Personal and Business Use

If possible, use a dedicated vehicle for business purposes. This can simplify your record-keeping and maximize your deductions.

Consult a Professional

The rules around vehicle expense deductions can be complex. Working with an experienced accountant, like the team at KKCPA, can help you navigate these rules and ensure you’re claiming all the deductions you’re entitled to.

Review Your Expenses Annually

At the end of each year, review your vehicle expenses and usage to identify opportunities for savings. For example, if you’ve increased your business use, you may be able to claim a higher percentage of your expenses.

How KKCPA Can Help

At KKCPA, we specialize in helping Ontario business owners navigate the complexities of corporate vehicle expenses and tax deductions. Our team can assist you with:

• Setting up a system for tracking vehicle expenses and usage.
• Calculating your business use percentage and applying it to your expenses.
• Ensuring compliance with CRA requirements to avoid penalties or audits.
• Identifying additional deductions and tax-saving opportunities.

Whether you’re a small business owner or manage a larger operation, KKCPA is here to help you make the most of your vehicle expense deductions for the 2024 tax year.

As the tax season continues, now is the perfect time to review your vehicle expenses and ensure you’re taking advantage of all available deductions. If you have questions or need assistance, the team at KKCPA is here to help. Contact us today to schedule a consultation and learn how we can support your business’s financial success.

By prioritizing proper record-keeping and strategic tax planning, you can turn your corporate vehicle expenses into a powerful tool for savings and growth. Let KKCPA be your partner in achieving your financial goals.