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Tax Write off for a leased car
Expert: John R. Mott
Wendy asked:
What are my tax write offs if I lease a car? Do you have a simple formula /chart/for amounts of car payment and write off. I don't know how much I should be spending on a lease to get a worthwhile write off.
John R. Mott answered:
The simple answer is that the tax benefit is more or less directly proportional to the total amount you spend on your vehicle and the percentage that you use it for business.
The total amount spent includes the monthly lease payments, amortization of any down payment, insurance & license, oil & gas, repairs & maintenance. The percentage used for business is the simple ratio of business kms over total kms.
There are other relevant issues. For example, there is a formula that imposes a cap on how much car is deductible for business. Your tax bracket will have an impact on the size of your benefit. If you are an employee, you will need to request a T2200 authorization form from your employer.
About the author
John Mott is a chartered accountant and tax specialist with a private practice in mid-town Toronto. He provides tax, accounting and advisory services to individuals and small businesses. He may be visited online at: johnmott.com.