If you’re hoping to increase the business use of your vehicle by using vehicle advertising, you may be in for a surprise.
Tax Myth: If I advertise on my vehicle, I can claim 100% of the vehicle expenses
This is not the case. Vehicle advertising does not change the nature of a trip. When a sole-proprietor uses a vehicle for both personal and business use, the business deduction is determined at the end of the year using a log that details the business trips. The business use is calculated by dividing the business kilometers by the total kilometers driven in the year and the actual costs are pro-rated accordingly.
Vehicle advertising will generate a business expense since the cost is 100% deductible; but this does not change the nature of future trips. If you use the vehicle for a family vacation, this is a personal trip even if the vehicle is covered in business advertising.
If the vehicle is owned by a corporation, the rules are more aggressive and complex. Personal access to a corporate owned vehicle can result in significant taxable benefits. They can be based on the original cost of the vehicle (rather than the current value) and considers both availability for personal use and the actual personal use.
Regardless of whether you are a sole-proprietor, a partner, or an employee of a corporation, it is important to keep detailed records of your driving. This can be accomplished easily with automated apps like Everlance. Learning about driving logs or taxable vehicle benefits from the Canada Revenue Agency can be costly.
If there are no driving records to support the business use of the vehicle, the Canada Revenue Agency can reduce or disallow your vehicle expense. For more information, check out the Canada Revenue Agency’s page about it or contact us today!