Vehicle leasing for small business

Homerhomer wrote: ↑ I will give you some write down and you can apply what you need to yourself.

There is plenty of info on the subject, you just have to google. Having a company you should have the accountant regardless (you could do without one if you are not incorporated) so why now pick his or hers brain.

Leasing is not necessarily best option, IMO lease v purchase depends if you want to switch cars often (ei every 4 years or less) then you should lease, if you want to run the car down to the ground then purchase.

There is a limit how much you can deduct, up to $800 per month lease, or up to $30,000 purchase, anything above that is non deductible for tax purposes. You will not deduct more if you buy a Porsche than if you would for Honda (unless you purchase Honda for less than $30k before taxes).

Now assuming you are incorporated, comes the questions who should purchase the cars, you personally or the corporation.
Typically if the car is used 90% or more for business purposes it is better to purchase it in the corporation, if less than personally, it has to do with the fact that the personal use of the automobile owned by the corporation becames personal benefit and has to be reported on the individual income tax, and T4 has to be issued for the benefit amount.

google cra small business vehicle, lots of info available.

604paladin wrote: ↑ Homerhomer pretty much covered it. I'm an accountant and I get asked this exact question a lot. In addition to what was said, I generally advise people to focus their purchase on what's best for their business rather than thinking primarily about how to maximize your expenses/deductions/writeoffs (whatever term you want to throw in there) since as a Canadian you get capped. $30k doesn't get you as many options as it used to.

Gee wrote: ↑ I recommend the lease. You can claim the amount against your business income and you only pay tax on the portion you lease. Since you are front facing with clients, it makes sense to change cars every few years. You wouldn't appear successful if you're driving a 10 year old car to meet a client.

I was led to believe that if you purchase a car, you can only claim the depreciated amount every year. You can probably claim the interest paid but that negligible and the biggest draw back is you pay the tax on the full amount of the car.

TheSpandexSuplex wrote: ↑ Would you happen to know if the $800 per month maximum is with taxes included or before taxes?

And yes, I agree, having a nice car is both beneficial to me when I meet colleagues and it's nice to be able to have a new car every few years, for personal reasons.

Gee wrote: ↑ I'm pretty sure it is before taxes

Gee wrote: ↑ I recommend the lease. You can claim the amount against your business income and you only pay tax on the portion you lease. Since you are front facing with clients, it makes sense to change cars every few years. You wouldn't appear successful if you're driving a 10 year old car to meet a client.

I was led to believe that if you purchase a car, you can only claim the depreciated amount every year. You can probably claim the interest paid but that negligible and the biggest draw back is you pay the tax on the full amount of the car.

TheSpandexSuplex wrote: ↑

And yes, I agree, having a nice car is both beneficial to me when I meet colleagues and it's nice to be able to have a new car every few years, for personal reasons.

Homerhomer wrote: ↑ And that's why cra puts a limit on the price, personal reasons or appearance are not income producing factors, hence not deductible.

TheSpandexSuplex wrote: ↑
And yes, I agree, having a nice car is both beneficial to me when I meet colleagues and it's nice to be able to have a new car every few years, for personal reasons.

Gee wrote: ↑ I recommend the lease. You can claim the amount against your business income and you only pay tax on the portion you lease. Since you are front facing with clients, it makes sense to change cars every few years. You wouldn't appear successful if you're driving a 10 year old car to meet a client.

I was led to believe that if you purchase a car, you can only claim the depreciated amount every year. You can probably claim the interest paid but that negligible and the biggest draw back is you pay the tax on the full amount of the car.

604paladin wrote: ↑ I don't necessarily agree.... pure numbers.. yes that is correct. But you should really make the choice on your business. For some realtors for instance who cater to only high end clients, yes, having a nice car every few years definitely gives them the image they need. Doesn't really look good if you drive a Hyundai and you're trying to sell someone a $8M home. However, a realtor who caters mainly to say first time home buyers would probably not appreciate it much if their realtor drove them around in a $100k+ car. And yes, I do know realtors in both the exact same scenarios I just mentioned.

In my past experience, I remember a sales guy telling me about flying into Calgary to negotiate a deal with a large company, and then getting mad at the car rental company for giving him a free "luxury" vehicle upgrade (A hummer) because it was the only thing they had. So he ended up parking 3 blocks away from the meeting and walking it because he didn't want them to see him in that car.. didn't want to appear "rich" .

TheSpandexSuplex wrote: ↑ Valid points, indeed. It's a bit of a catch 22 with my situation in that I will be opening a dental specialist surgery. While I would like a nice car (because who doesn't and I think I deserve it, without a need for an explanation) I also believe that my referring dentists would expect no less. It would give the wrong image to show up in an econo box, IMO.

But then you have the public who are also my patients. While on the one hand, I don't want to hand someone a bill for $10k while I run off to my Porsche, I also think that my patients would be put off, if I drove the econo box. It would imply a lack of success and therefore, skill. I would assume a successful surgeon is a good surgeon. I could also be wrong, lol

Either way, Im not looking to buy a Ferrari or such. Something to treat myself, and have fun. Id much rather give my kids $50k each for a down payment on a house, education, wedding, etc. vs dropping that coin on a ultra high end vehicle. I'd feel too guilty, lol

TheSpandexSuplex wrote: ↑ Id much rather give my kids $50k each for a down payment on a house, education, wedding, etc. vs dropping that coin on a ultra high end vehicle. I'd feel too guilty, lol

Gee wrote: ↑
and they question your ability in your chosen profession.