Author Topic: car allowance (Read 2318 times)

gerula · « **on:** December 16, 2009, 09:29:27 pm »

I live in Oakville and recently I got a new job that requires some traveling?
The company pay for mileage used for business at a rate of 43 cents /km
Since I was asked to use my personal car I am also receiving 550CAD flat monthly rate for car allowance .
I understand this is a taxable benefit so I suspect by the end of the day half of this would go to the gouvernment not to mention my car insurance with increase as well.
Can I claim some of the expenses for fixing my car s.a. oil change , breaks etc.) to offset some of these taxes?

Can I purchase a new car or lease on and claim the monthly lease rate when submitting the taxes forms in February?
or should i ask for a company car? At some point I was ask what I would like call allowance or company car and my response was i don't know yet.

there are a lot of smart people i am sure will give me some good advices

thanks in advanced

vdk · « **Reply #1 on:** December 16, 2009, 09:56:34 pm »

If you are self-employed you can deduct lease, gas, oil changes, parking etc from taxes.

$550/month + $0.43/km sounds like a good load of money to me. I think you did good.

gerula · « **Reply #2 on:** December 16, 2009, 10:33:52 pm »

thanks for the quick reply.
i have a fulltime job that requires some traveling around GTA.
For now a receive along with my paycheck these $550/month but i was told this is taxable income and it will show up in my T4 as separate income.
Can I expense anything in my case?
Can I lease or buy a car and claim the monthly rate as expense or at least $550 assuming the lease rate will be somewhat higher?

kardood69 · « **Reply #3 on:** December 16, 2009, 10:57:03 pm »

Talk to your finance guys or maybe your boss or a peer in the company?

The Mighty Duck · « **Reply #4 on:** December 16, 2009, 11:24:31 pm »

This has been discussed a couple of times here. These threads might help you:

http://www.canadiandriver.com/forum/index.php?topic=60138.0
http://www.canadiandriver.com/forum/index.php?topic=60856.0

The first thing I would do (based on the advice in those two threads) is talk to a tax accountant and ensure you understand the tax implications of a company car. Then you can make a more informed decision about how to move forward...

ovr50 · « **Reply #5 on:** December 17, 2009, 12:22:43 am »

Demo is correct - talk to your accountant about current income tax rules, as they are constantly changing and I am not sure what is exactly the rules today. Someone totally up on current income tax is your best resource, not ppl on a car forum. Free advice can be worth what you paid for it.

davidy · « **Reply #6 on:** December 17, 2009, 01:02:20 am »

I believe that you can lease up to $800 per month or if you own your own vehicle, depreciate your vehicle with a value of up to $30,000. You will need to keep track of your vehicle expenses, insurance, registration, etc. and a log of the mileage. Each calendar year, you will need to note your beginning and ending mileage....you should be able to write off the percentage of your business miles to your overall miles excluding your miles to/from work. Keep the receipts and the reason for the business miles. This is easy to do on your taxes if you use a CRA approved tax software.

Your monthly allowance and per km rate is pretty good IMO.

Dave

dash · « **Reply #7 on:** December 17, 2009, 11:13:48 am »

CRA allows up to 51cents per Km as a reasonable allowance to offset all of your car expenses, and therefore you can not claim any further reduction of expenses. It may be best to combine (the mileage and monthly allowance) as all income and offset with expenses (not fully sure if you can do this-but beleive you can since you can show that 43 cents is much lower than what's max allowable and could be argued that the reimbusement is just for operating expenses not for the lease or depricaition expense).
Davidy is right about the lease and capital max, I must add, you need to keep log of all mileage details ( time and who, business or personnal for every trip), although there are new rules in the works to simply this logging process.

tortoise · « **Reply #8 on:** December 17, 2009, 11:33:10 am »

What kind of company car are they offering?

If it's something half-way decent that could be a good route to go. No expenses and no worries.

dash · « **Reply #9 on:** December 17, 2009, 01:31:35 pm »

toroise,

not exactly, a company provided car unless strictly left on company lot and only used for business, will trigger a taxable benefit of porportionate amount of the lease or capital cost plus deemed operating expenses rate.

articsteve · « **Reply #10 on:** December 17, 2009, 03:15:49 pm »

Quote from: gerula on December 16, 2009, 09:29:27 pm

I live in Oakville and recently I got a new job that requires some traveling?
The company pay for mileage used for business at a rate of 43 cents /km
Since I was asked to use my personal car I am also receiving 550CAD flat monthly rate for car allowance .
I understand this is a taxable benefit so I suspect by the end of the day half of this would go to the gouvernment not to mention my car insurance with increase as well.
Can I claim some of the expenses for fixing my car s.a. oil change , breaks etc.) to offset some of these taxes?

Can I purchase a new car or lease on and claim the monthly lease rate when submitting the taxes forms in February?
or should i ask for a company car? At some point I was ask what I would like call allowance or company car and my response was i don't know yet.

there are a lot of smart people i am sure will give me some good advices

thanks in advanced

The company pay for mileage used for business at a rate of 43 cents /km

You don't need to declare that for tax purposes as it's below the amount CRA deems reportable. I see DASH says it's 51 cents and it maybe. I thought it was 45 cents, but whatever, your under at 43 cents.

Since I was asked to use my personal car I am also receiving 550CAD flat monthly rate for car allowance .
I understand this is a taxable benefit so I suspect by the end of the day half of this would go to the gouvernment

Half of that will go to income tax providing your making well above 100K per year. You need to do a quick check on what your NET income is after RRSP/pension contribution, dependents, etc. You would be surprised, but in Ontario with a 100K gross income, after maximum pension deductions and a spouse/kids, your looking at about 40% tax rate. Then add 1K for the McSquinty health tax.

my car insurance with increase as well.

It's not much. About a 100 bucks providing your not acting like a delivery person.

Can I claim some of the expenses for fixing my car s.a. oil change , breaks etc.) to offset some of these taxes?

Yes, but then you gotta declare the 43 cents and then in your into the whole business of record keeping and deciding what share is personal and what share is a legitimate. You need to keep all these records for 6 years and unless your the type that loves keeping gas receipts, mileage logs, etc., EVERY DAY of your life it just isn't worth the hassle.

Can I purchase a new car or lease on and claim the monthly lease rate when submitting the taxes forms in February?

If you bought a new car, this December would be the month to do it. Interest on your car loan is tax deductible. Works out to the same as leasing over the long run, but your not trapped like with leasing.

should i ask for a company car? At some point I was ask what I would like call allowance or company car and my response was i don't know yet.

Company car is the way to go providing it's a model you can tolerate. By far the best option. I got one. I'm assigned 50% usage for tax purposes and add about $5000 to my measly income.

safristi · « **Reply #11 on:** December 17, 2009, 03:24:20 pm »

..................

gerula · « **Reply #12 on:** December 17, 2009, 07:59:15 pm »

thanks everyone for yur quick responses.
articsteve you said:
If you bought a new car, this December would be the month to do it. Interest on your car loan is tax deductible. Works out to the same as leasing over the long run, but your not trapped like with leasing.

my wife what me to get a second car.
you said december is the month to buy/lease a car...why? interest on car loans can not be deducted in january, or feb?

is car loan interest tax deductible for me because i receive car allowance or it applies to every honest canadian out there?

my simple math ( and i have no clues about acounting) was telling me. if the company is giving me 550/month I can use that amount to lease a new car and somehow save on some taxes, otherwise why would they give me those money as separate income and not just simply add them to my anual income.

gerula · « **Reply #13 on:** December 17, 2009, 08:10:16 pm »

tortoise you were asking me what company car are they offering...
well last time I discussed this matter with my boss he said:
"do you want the car allowance or to get you ass in a shiny new car..."
i am the only one in the company with car allowance so have no ideea what model are they gonna buy if any
and i guess there are a lot of shiny cars out there
somwhere in this forum I read a comment that said;...just give me the money, this way you have the control of the car you use

dougjp · « **Reply #14 on:** December 17, 2009, 08:19:43 pm »

While there is good information here, the best advice is as mentioned by several of us before - invest in a visit with an accountant. Your situation, as implied by the last post (2nd car, when to buy) may be somewhat unique and you could (or may not) make as bad a financial decision, as before you started this post. We don't even know how much you will be making, what other deductions you have etc. These variables are the things that may make one option better than another, where it would be the other way around for someone else.

Myself, from the sound of it, if you don't know an accountant, I would ask the Company for a referral to one and pay out of your pocket (if need be). As an employer, I would be impressed by someone wanting to get sufficient professional advice and "do the right thing". If you are not comfortable with that, then I would get a referral from a trusted friend, relative or other professional. I just suggest you don't make final decisions only based on this forum!

The Mighty Duck · « **Reply #15 on:** December 17, 2009, 08:26:41 pm »

Quote from: dougjp on December 17, 2009, 08:19:43 pm

While there is good information here, the best advice is as mentioned by several of us before - invest in a visit with an accountant. Your situation, as implied by the last post (2nd car, when to buy) may be somewhat unique and you could (or may not) make as bad a financial decision, as before you started this post. We don't even know how much you will be making, what other deductions you have etc. These variables are the things that may make one option better than another, where it would be the other way around for someone else.

Myself, from the sound of it, if you don't know an accountant, I would ask the Company for a referral to one and pay out of your pocket (if need be). As an employer, I would be impressed by someone wanting to get sufficient professional advice and "do the right thing". If you are not comfortable with that, then I would get a referral from a trusted friend, relative or other professional. I just suggest you don't make final decisions only based on this forum!

Can't stress this enough.

gerula · « **Reply #16 on:** December 17, 2009, 08:31:30 pm »

i totaly agree with you and for sure will be looking for an acountant...other then google

I was thinking on calling canada revenue as well
i my humble opinion i was hoping for an easy response like go for it

articsteve · « **Reply #17 on:** December 18, 2009, 01:00:49 am »

Quote from: gerula on December 17, 2009, 07:59:15 pm

thanks everyone for yur quick responses.
articsteve you said:
If you bought a new car, this December would be the month to do it. Interest on your car loan is tax deductible. Works out to the same as leasing over the long run, but your not trapped like with leasing.

my wife what me to get a second car.
you said december is the month to buy/lease a car...why? interest on car loans can not be deducted in january, or feb?

is car loan interest tax deductible for me because i receive car allowance or it applies to every honest canadian out there?

my simple math ( and i have no clues about acounting) was telling me. if the company is giving me 550/month I can use that amount to lease a new car and somehow save on some taxes, otherwise why would they give me those money as separate income and not just simply add them to my anual income.

otherwise why would they give me those money as separate income and not just simply add them to my anual income.

It's better for both you and the employer to keep separate your "earned" income from "expense" income for many different reasons. Whatever form of money they give you for expenses incurred doing your job it's all noted in their books and they must inform the government about those amounts given to you.

interest on car loans can not be deducted in january, or feb?

Interest on loan deduction is separate from "capital cost allowance" so month doesn't matter. However, when you purchase the car does. If you buy a car after then end of this year you only can deduct 15% of the cost for year ending 2010. If you bought this December you would get 15% off this tax year ending 2009. Then 30% for year ending 2010. Doesn't matter what month you lease.

The best option is to have your company buy or lease a car for you. There is a "standby charge" applied to your income. To receive a standby charge of $550. per month the car will be worth about $26,000 plus PST. If they lease a car for you your "standby charge" would be 2/3rds of the total lease. Generally, a company lease will give you a lower "standby charge" than a company purchased car.

This way you will not need an accountant to figure out your car expenses.

Although you might need one for the rest of your taxes.

gerula · « **Reply #18 on:** December 18, 2009, 08:14:39 am »

thanks a lot
i realy appreciate you responses

airbalancer · « **Reply #19 on:** December 18, 2009, 08:19:18 am »

which car are you looking at?