Topic: Actual Operating Costs

[johngenx]

Revenue Canada calculates Capital Cost Allowance, not depreciation.  Of course, when the asset is disposed, then a reconciliation can be made between CCA and depreciation.

True depreciation is the difference between what you paid and what would be realized if it were sold.  Without actually selling it, estimation is the only way.

[CyberNick]

For what purpose I dare ask ?
 

None other then this thread. I don't write off the cost of my vehicle as it's strictly for personal use...

Business trips? That's what rentals are for!

[carcrazy]

Revenue Canada calculates Capital Cost Allowance, not depreciation.  Of course, when the asset is disposed, then a reconciliation can be made between CCA and depreciation.

True depreciation is the difference between what you paid and what would be realized if it were sold.  Without actually selling it, estimation is the only way.

Right on.  It's on CRA website.
The CCA for motor vehicles is 30% per-year (in the first year the "half" rule apply).
The base for calculation is the cost without GST and PST.

I guess you can claim the GST separately, but no sure about PST.

Does anyone know how to calculate the CCA for a situation where you start using your vehicle for business in the second or subsequent year of ownership? Do you simply subtract the CCA for the precedent years and keep going?

Any CA here?

[Trainman]

Just to clarify my numbers, the "depreciation" is as johngenx noted the number that CRA calculates for CCA as that is what goes into my taxes.

Real depreciation may be a bit lower for the Forester at this point but that won't be determined until it is sold and then compared to the CCA.

For my business purposes, I use the CRA calculation.

[initial_D]

Who is the accountant? 

[dash]

Carcrazy,

Capital Cost max is 30k,
Year 1 with 1/2 year rule, Depn is $4,5K
Year 2  30K-4.5 @ 30% Depn is $7.65k
year 3  17.85k @ 30%

-Note you don't have to take the maximum amount of Depreciaton expense every year, say if you have a bad year, minimize loss, and move deductibility into following years
-Cars are in a special Asset Class, you can not write off a loss (disposal less than net book value)

[CyberNick]

I did some quick math with the CRA's CCA method 50% first year and 30% per year after that, it came out to pretty close to the same as what I had calculated before by estimating the actual depreciation.

So, as I suspected, most depreciation numbers reported here are only good for tax write off purposes, because unless your vehicle happens to have major collision history there's no way it would depreciate so much.

[carcrazy]

I did some quick math with the CRA's CCA method 50% first year and 30% per year after that, it came out to pretty close to the same as what I had calculated before by estimating the actual depreciation.

First year is 15% (half of the 30%). The subsequent years are 30%.

[carcrazy]

Carcrazy,

Capital Cost max is 30k,
Year 1 with 1/2 year rule, Depn is $4,5K
Year 2  30K-4.5 @ 30% Depn is $7.65k
year 3  17.85k @ 30%

-Note you don't have to take the maximum amount of Depreciaton expense every year, say if you have a bad year, minimize loss, and move deductibility into following years
-Cars are in a special Asset Class, you can not write off a loss (disposal less than net book value)

Thanks for the elaborated reponse. Few questions:
Don't thay have 2 classes? 10 and 10.1, 10 being the one without upper limit?
Are you allowed to include the other fees (A/C tax, rustproofing, admin fee, etc) - except for PST and GST, in the capital cost up to 30K?


On your comments:

Let me see if I understand this correctly: what you are saying is that in a year with loss (no tax payable) there is no point in maximizing the loss because you don't pay tax at all anyway so you can claim a lower percentage as CCA on the vehicle. The unclaimed portion (up to 30%) can be carried over into the next year when let's say you have profit an want to maximize expenses and minimize the taxable income? Is that right?

On a side note, am I reading correctly that you can now expense computers purchased after February 2009 in the first year and without the 1/2 rule?

[CyberNick]

I did some quick math with the CRA's CCA method 50% first year and 30% per year after that, it came out to pretty close to the same as what I had calculated before by estimating the actual depreciation.

First year is 15% (half of the 30%). The subsequent years are 30%.

Oh, OK. I dropped that into my spreadsheet and it didn't change that much. But it brought the number for year 3 closer to my actual depreciation estimate (not that my method was correct).

The point remains that these numbers here are not really "Actual Operating Costs" at least when it comes to the amounts for depreciation. These numbers are good only for the CRA which is not calculating depreciation at all. As it was pointed out earlier, it's called Capital Cost Allowance (CCA), and IMO, in a lot of cases it will be more then the actual depreciation on any vehicle.

[mmorriso]

2002 Mazda Protege5

data includes gas, maintenance and insurance. no depreciation calculated (purchased new in 02 and plan on driving it for as long as possible)

2008 22325km/$4153=$0.19/km
2009 17619km/$4130=$0.23/km (lower km due to carpooling, higher costs due to maintenance)
2010 expecting higher km and higher total (2 sets of new tires and expected new brakes)

2004 Toyota Sienna XLE

data includes gas, maintenance and insurance. no depreciation calculated (purchased used in 09 plan on driving it for as long as possible)

2009 6555km/$3965=$0.60 (new winter tires, rims, relativley expensive maintenance interval)
2010 hopefully keeping costs low (although new control arm was an expensive and unexpected repair - timing belt also due)

[dash]

Carcrazy,

-Class 10.1 max 30k per each car , not pooled
-Any allowable cost up to 30k (like you mentioned), excluding taxes
-Interpertation on using CCA to minimize tax is correct.
-First not a tax expert, but this what I can summerize: computers purchased between Jan 27/09 to before Feb 2010, can moved to Class 52, 100% no 1/2 year rule

[articsteve]

For what purpose I dare ask ?
 

None other then this thread. I don't write off the cost of my vehicle as it's strictly for personal use...

Business trips? That's what rentals are for!

You had me concerned there.  When Revenue Canada notices a screw up in personal tax returns it waits about 2 to 3 years and then takes you back another 4 years and then nails you after the penalty and interest compound are out of sight.  When ppl run afoul of Revenue Canada it's often over exaggerated business use deductions.  Because the actual guidelines, if they chose to follow them, are ruthless such as not detucting your portion of a business dinner, writing down who and when sporting tickets were given to customers; like who does that  

[carcrazy]

For what purpose I dare ask ?
 

None other then this thread. I don't write off the cost of my vehicle as it's strictly for personal use...

Business trips? That's what rentals are for!

You had me concerned there.  When Revenue Canada notices a screw up in personal tax returns it waits about 2 to 3 years and then takes you back another 4 years and then nails you after the penalty and interest compound are out of sight.  When ppl run afoul of Revenue Canada it's often over exaggerated business use deductions.  Because the actual guidelines, if they chose to follow them, are ruthless such as not detucting your portion of a business dinner, writing down who and when sporting tickets were given to customers; like who does that  

Are you refering to business expenses claimed on the personal tax retun or corporation?
I think for the corporation income tax, the software will calculate the expenses within the CRA guidelines (ex. dinner with client will be 50% by default).

[articsteve]

Are you refering to business expenses claimed on the personal tax retun or corporation?
I think for the corporation income tax, the software will calculate the expenses within the CRA guidelines (ex. dinner with client will be 50% by default).

In my previous life I had a Limited Corporation and myself and when I got nailed by Revenue Canada they got the Limited Corporation, but left me alone, but it was still my money in the end.  Back then they looked at $5K in meals yearly deducted for business purposes, but not one was with a client, and they didn't say boo.  They had it (me) for something bigger.   

Today if I pick up the tab it's usually for about 6 ppl and I just submit my CC receipt to the company and get a cheque payable to me personally.  I don't get assigned a personal amount.  We've got 4 Blue Jay season tickets in a row just centre right of home plate and one pair of Reds which suck for the Leafs.  In 6 years I've been to one Blue Jays game were I scalped two of the tickets and spent the money on beer and one Leaf game which is enough for me.  I just drank really expensive beer and ate lousy Pizza, Pizza, and watched the game primarily on the jumbotron.  Technically, I should pay tax on those tickets.  But BDO Dunwoody handle that department so it's not my problem and most of those tickets are actually given away to customers.  I think Revenue Canada is under orders to stay away from Hockey because I think that about 90% of all NHL tickets sold are business write offs, but the majority at any given time are  personal use.

So in answer to your question, I think "entertainment" expenses are to individual for each "corporation" that a software program can properly discern.   All I know is "technically"  if your NOT at arms length with the company you are supposed to pay a taxable benefit on the meal or entertainment service, but again, in larger groups that is hard to establish so it's not worth auditing. 

[safristi]

Hey my mistress ate half of my Business dinner.......do i get a deduction.............................sweet...........mother of whatsissname.....this thread is aboot OPERATING COSTS..........not governmental/private boondoggles..............i once had a company car drove the sh8p out of it and got 3 cents back.............

[carcrazy]

I think the way it works with the "meals with the client" is you expense it personally to the company (out of pocket expense for business purposes - need to document who was the client, etc. in your expense report), the company pays you in full, then the company books the full amount under entertainment/advertising, etc., but only 50% goes as an expenese when the tax software does the math.