Corporate vs. Personal Vehicle Use: What’s the Best Option for Your Business?
- K Liu Accounting Services Inc.
- Jul 11, 2025
- 2 min read
When running a small business or corporation, using a vehicle for business purposes is often essential. However, whether that vehicle is owned by the company or personally by the shareholder can significantly impact your tax deductions, record-keeping, and overall business strategy. Here’s a breakdown of the differences, along with the pros and cons of each approach.
1. Using a Personally-Owned Vehicle for Business
When a shareholder or employee uses their personal vehicle for business purposes, the corporation can reimburse them based on a per-kilometre rate set annually by the CRA. This is considered a tax-free allowance for the employee and a deductible expense for the corporation.
Pros:
Simplicity: The company avoids the complexities of owning, insuring, and maintaining a vehicle.
Tax-Free Reimbursements: If the reimbursement rate does not exceed the CRA’s limit, it is non-taxable.
No Personal Tax Impact: The employee doesn’t need to report the reimbursement as income.
Cons:
Mileage Logs Required: CRA requires a detailed logbook to support the business mileage claim.
Cap on Deductibility: You are limited to the CRA-approved per-kilometre rates, which may not fully cover high operating costs.
No Capital Cost Allowance (CCA): You cannot claim CCA or interest on financing through the business.
2. Using a Corporation-Owned Vehicle
When the corporation owns or leases the vehicle, it can claim expenses such as fuel, insurance, maintenance, lease payments, and depreciation (CCA). However, if the vehicle is used personally by the shareholder or employee, a taxable benefit (standby charge and operating cost benefit) must be reported on their T4 slip.
Pros:
More Deductions Available: The company can claim full operating expenses related to business use.
Access to CCA: Allows for depreciation deductions over the useful life of the vehicle.
Better for High-Mileage Business Use: The benefit is more substantial if the vehicle is mostly used for work.
Cons:
Taxable Benefits: Personal use of the vehicle must be reported and taxed as a benefit to the employee.
Detailed Tracking: You must track business vs. personal use to calculate the taxable benefit accurately.
More Administrative Burden: The business is responsible for managing insurance, registration, and vehicle maintenance.
Which Option is Right for You?
Choosing between a corporate-owned and personal vehicle depends on how often the vehicle is used for business, your comfort level with record-keeping, and your overall tax planning strategy. If personal use is minimal and the company can manage the added administration, a corporate-owned vehicle might be more beneficial. On the other hand, using a personal vehicle with reimbursements is simpler and offers clean separation between business and personal use.
How K Liu Accounting Services Inc Can Help
At K Liu Accounting Services Inc, we help business owners and corporations make informed decisions when it comes to expense management. Whether you’re a solo entrepreneur or managing a growing corporation, we’ll guide you in choosing the right approach for your business needs.
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