buying used car for company?

[brisk]

I have my regular job I also started my own company. Now I need a 2nd car for my family. just wondering if I buy the car for the company istead of myself will save some money? (tax etc?)

I need a car for the business but it will not be 100% for business use. I know insurance for business car is expensive. (not sure how expensive it is).

Or I can purchase the car for personal use and reimbursement the expense (gas, mileage etc) later on.

Any advice?

[ilovecables]

It depends greatly on what the use for business portion is.
If it's less than 50% it may not be worth it. You should talk to your accountant to be sure though.
Plus, you MUST keep mileage logs, all receipts, etc.
It can become a pain.
I used to do that, but when I relaized what effect it had on the year' taxes, I stopped.Wasn't worth the effort.
My 2 cents.

[Bullseye]

You don't need business insurance for a vehicle, just keep it all in your own name, and expense the portion of all costs related to the vehicle.

[brisk]

It depends greatly on what the use for business portion is.
If it's less than 50% it may not be worth it. You should talk to your accountant to be sure though.
Plus, you MUST keep mileage logs, all receipts, etc.
It can become a pain.
I used to do that, but when I relaized what effect it had on the year' taxes, I stopped.Wasn't worth the effort.
My 2 cents.


I goto post office every day but post office is on the way to my work. I do not have an accountant yet....:-(

[brisk]

You don't need business insurance for a vehicle, just keep it all in your own name, and expense the portion of all costs related to the vehicle.

What you are suggesting is, I purchase the car using my own money and insure it under my name, when tax time comes, claim all the related expenses? Can I claim the price I paid for the car?

[Bullseye]

What you are suggesting is, I purchase the car using my own money and insure it under my name, when tax time comes, claim all the related expenses? Can I claim the price I paid for the car?

See here;

CRA (http://www.cra-arc.gc.ca/tax/business/topics/solepartner/businessexpenses/motor/menu-e.html)

A car doesn't need to be under business name to write off expenses, it's your personal vehicle, and you are just using it for business sometimes.

All the rules are in that link.

[sparkplug]

What you are suggesting is, I purchase the car using my own money and insure it under my name, when tax time comes, claim all the related expenses? Can I claim the price I paid for the car?

You claim depreciation. I believe it's 15% for the first year (even if you purchase it on December 31st) and then 30% per year afterwards. You also claim the full amount of GST back as a capital cost allowance when you file your GST payment.

[airodus]

You can also just expense your mileage to your business. Not too sure what the standard rate is, but I think it's between 40-50 cents a kilometer. I'm not too sure if you would be able to claim your insurance and other expenses if you do this tho.

[airodus]

You claim depreciation. I believe it's 15% for the first year (even if you purchase it on December 31st) and then 30% per year afterwards. You also claim the full amount of GST back as a capital cost allowance when you file your GST payment.

I don't think you can claim depreciation/GST unless the company owns the vehicle.

[cdnNick]

We can all sit here and guess. But I think your best bet would be to consult with an accountant. Especially since you are talking about your business and tax write-offs, you really don't want to get that wrong.

[Bullseye]

No, you can't just claim mileage if your business is a sole proprietership. To do this, you'd need to be an employee of your corporation.

No, you don't need to put the vehicle in the businesses name to claim expenses as business related. I do this every year for many small businesses.

[wheel]

I'm not 100% sure about the previous post - I don't know why you can't claim mileage as an expense if you're not an employee. I pay mileage to my hourly contractors, and I take out mileage myself all the time, and I'm not on my company as an employee - at least I don't draw a salary. That being said, I'm not an accountant - so perhaps it's true but it sounds a little off.

My accountant suggested that there are two routes to go: have the company buy/lease the car. If so, you need to track every single thing about the car. And this only works if you use it substantially for business, like 90%. (that's what he said anyway).
Alternate two is to just pay yourself mileage on your own car. At something like 50 cents a kilometer - tax free! - for the first 5000K it's a great way to go. It's what I do. A 1000K trip to Ottawa and back nets me $500 tax free.

[Bullseye]

I'm not 100% sure about the previous post - I don't know why you can't claim mileage as an expense if you're not an employee. I pay mileage to my hourly contractors, and I take out mileage myself all the time, and I'm not on my company as an employee - at least I don't draw a salary. That being said, I'm not an accountant - so perhaps it's true but it sounds a little off.

My accountant suggested that there are two routes to go: have the company buy/lease the car. If so, you need to track every single thing about the car. And this only works if you use it substantially for business, like 90%. (that's what he said anyway).
Alternate two is to just pay yourself mileage on your own car. At something like 50 cents a kilometer - tax free! - for the first 5000K it's a great way to go. It's what I do. A 1000K trip to Ottawa and back nets me $500 tax free.

A sole proprieter can write off the portion of vehicle costs used for business, up to 100% of them, but you can not just expense mileage. If the structure is corporate, the rules are different, as it is a separate entity.

[brendonp]

A sole proprieter can write off the portion of vehicle costs used for business, up to 100% of them, but you can not just expense mileage. If the structure is corporate, the rules are different, as it is a separate entity.

Bullseye is definetely correct here! That being said, I know many people that just write off mileage anyway. Technically speaking, you should be incorporated to be paid mileage, but everyone I know of that does write it off without their company being incorporated (really only a couple of people), haven't had any difficulty with the government - I certainly wouldn't suggest it, though!

When you think about it, if you drive a thousand kms or so a month for business, it's reason enough to incorporate (from a financial perspective at least), especially if you own your car. My last vehicle was paid for for 3 years and I still claimed 7-8k a year in mileage expenses on it... granted I was driving a fair bit, but it was tax free money. Had the company owned the car, I would have received the benefit of driving the car, but any personal mileage would be a taxable benefit (at least that's how I remember my accountant explaining it to me - Bullseye would probably know). You may technically be better off with a cheaper car (assuming maintenance is reasonable) - figure you pay 10k for a used car, your monthly payments can be fairly easily covered by your mileage expenses...

[wheel]

A sole proprieter can write off the portion of vehicle costs used for business, up to 100% of them, but you can not just expense mileage. If the structure is corporate, the rules are different, as it is a separate entity.
Interesting and bizarre, I didn't know that.

[brisk]

Interesting... I am still looking for a car :-(
Yes, my side business is incorporated. basically, if I purchase a used car, I can write off mileages and depreciation, right? Well, my inc has 2 owners, my wife and myself with no employee :-(
It's very hard to find a good used car now. what about leasing? e.g. lease a mazda 3 or civic?

Thanks

,
Bullseye is definetely correct here! That being said, I know many people that just write off mileage anyway. Technically speaking, you should be incorporated to be paid mileage, but everyone I know of that does write it off without their company being incorporated (really only a couple of people), haven't had any difficulty with the government - I certainly wouldn't suggest it, though!

When you think about it, if you drive a thousand kms or so a month for business, it's reason enough to incorporate (from a financial perspective at least), especially if you own your car. My last vehicle was paid for for 3 years and I still claimed 7-8k a year in mileage expenses on it... granted I was driving a fair bit, but it was tax free money. Had the company owned the car, I would have received the benefit of driving the car, but any personal mileage would be a taxable benefit (at least that's how I remember my accountant explaining it to me - Bullseye would probably know). You may technically be better off with a cheaper car (assuming maintenance is reasonable) - figure you pay 10k for a used car, your monthly payments can be fairly easily covered by your mileage expenses...

[weebg]

You can either claim the business mileage ($ per km) OR claim the depreciation and all related car expenses (insurance, gas, maintenance, interest on the loan (if you are financing it), lease payment (if you aren't financing it), etc). The one note with the latter way of doing things is that you have to keep track of the personal/business mileage ratio and apply it to any costs you claim.

Basically, if your car is financed and you drive a lot, it might be better to claim the mileage since it adds up really quick and the calculation is simple.

If you lease your car, don't drive very far, or tend to get a new car every 3-4 years, it might be better to claim the depreciation and expenses. You'll have to do the math.

I don't think it matters if you buy a used car or new. It all boils down to how much you drive and how expensive the car it is.

Here is the government link to the current mileage reimbursement rates (http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/deductions/lines248-260/255/rates-e.html) .

Here's the government link for business use of a motor vehicle (http://www.cra-arc.gc.ca/tax/business/topics/solepartner/businessexpenses/motor/menu-e.html)

Yes, my side business is incorporated. basically, if I purchase a used car, I can write off mileages and depreciation, right? Well, my inc has 2 owners, my wife and myself with no employee :-(