No, you cannot deduct the full purchase price of a vehicle in the year you buy it. Instead, Canadian tax law allows you to claim depreciation over several years through a deduction called Capital Cost Allowance (CCA). The CCA system spreads the cost of your vehicle across multiple tax years at a set percentage rate, which means you recover the investment gradually rather than all at once. Capital Cost Allowance is the CRA's method for letting business owners and self-employed workers deduct the depreciation of assets like vehicles. Instead of treating a vehicle purchase as a one-time expense, the CRA recognizes that assets lose value over time and allows you to claim that loss through CCA. For tax purposes, this deduction is not the same as actual depreciation. The CRA sets fixed rates for different asset classes, and vehicles typically fall into a category with a specific CCA percentage that you apply each year. Most passenger vehicles in Canada fall into Class 10, which has a depreciation rate of 30% per year on a declining-balance basis.
No. The CRA requires you to spread the vehicle cost over multiple years using Capital Cost Allowance (CCA). In Canada, passenger vehicles depreciate at 30% per year on a declining-balance basis, with a half-year rule applied in the first year. This means your first-year deduction is only 15% of the purchase price.
CCA lets you claim depreciation on the vehicle's purchase price plus other expenses like fuel and maintenance. The mileage method allows you to claim a fixed rate per kilometer driven for business. You can choose one method per vehicle per tax year, but not both at the same time.
You can choose not to claim CCA in any given year, but once you claim it, the CRA generally expects you to continue claiming it in future years. Skipping years can complicate your tax position and draw scrutiny during audits, so it's best to be consistent.
When you sell a vehicle, the sale price is compared to the remaining book value (original cost minus all CCA claimed). If the sale price is higher, you may owe capital gains tax. If it's lower, you may claim a loss. This is why keeping purchase and sale documentation is important.
Yes, but only on the business-use portion. You would claim 50% of the allowable CCA deduction. You must track mileage carefully and be able to document the business-use percentage to support this claim with the CRA.