Jesse asked:

Regarding motor vehicle expenses claimed as expenses for the purpose of the business tax return, I understand that you add up all your expenses paid out for the vehicle, however, you can only claim a percentage of those expenses, which is based on the kilometres used for business purposes divided by the total kilometres driven by the car in the given year.

For an example, let's say we had used a vehicle for 22,500 km for business purposes and 30,000 km were driven total. Thus creating a 75 per cent allowable deduction rate on all vehicle expenses.

My question is regarding GST and HST paid out on those expenses, is the business owner also only allowed to claim say 75 per cent of the GST/HST they paid out in regards to the expenses on that vehicle? Or can they claim all of it?

Gord Ahier answered:

For sole proprietors and partners if the business use is greater than 10 per cent and less than 90 per cent, then input tax credits can be claimed on a prota basis on the allowable CCA and operating expenses. If the personal use is more than 90 per cent then no input tax credits can be claimed. If the business use is 90 per cent or greater than the full amount of input tax credits can be claimed.

About the author

Gordon Ahier
McClurkin Ahier & Company LLP
Phone 519-725-2600 ext. 400
Fax 519-725-2484
Toll Free 877-725-2611
Visit us online at: www.mac-ca.com

 
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