How to write off my vehicle in my small business?
As we head into 2025, there are a few updates around vehicle-related deductions and benefit rates that could impact your business. The federal government has made some modest changes to the limits on what businesses can claim for vehicles used for work, as well as the rates used to calculate employee vehicle benefits. Here’s a quick rundown of what’s changing — and why it matters for you.
What are the limits for writing off a vehicle in my small business?
If your business uses passenger vehicles for work, good news: the amount you can claim for depreciation (also known as the capital cost allowance) is going up slightly. Starting January 1, 2025, the maximum cost you can write off for most vehicles goes up from $37,000 to $38,000. This applies whether you’re buying a new or used vehicle.
If you lease instead of buy, the maximum monthly lease amount you can deduct is also increasing — from $1,050 to $1,100. So, if you’re shopping for a vehicle for your business in the new year, you may get a little more tax value out of your purchase or lease.
No Change for Zero-Emission Vehicle Deduction
For businesses investing in electric or plug-in hybrid vehicles, the deduction limit remains steady at $61,000. If you’re buying a vehicle that qualifies as zero-emission (think EVs, hydrogen-powered, or plug-in hybrids with enough battery capacity), this is the max amount you can write off.
How much can I reimburse myself or my employees from my corporation for using personal vehicles for work?
If you or your employees use personal vehicles for work-related driving, there’s another small boost to be aware of. The per-kilometer rates used to reimburse employees for business travel are going up by two cents.
Here’s the breakdown for 2025:
- In the provinces:
- 72¢/km for the first 5,000 km
- 66¢/km after that
- In the territories:
- 76¢/km for the first 5,000 km
- 70¢/km after that
These rates are what the government considers reasonable, so paying employees at or below these amounts avoids triggering a taxable benefit to the employee, while still being deductible to the employer.
How do I calculate the benefit for employees’ personal use of company vehicles?
If your business provides employees with a company vehicle and covers personal use, the per-kilometer rates used to calculate taxable benefits are also going up slightly — by one cent. For most employees, that rate is now 34¢ per kilometer of personal use. For those in car sales or leasing roles, it’s 31¢ per kilometer.
This tweak could slightly change how much tax employees pay on the personal-use portion of a work vehicle, depending on their driving habits.
Interest Deduction for Car Loans Unchanged
If you’re financing a business vehicle, the maximum interest you can claim stays at $350 per month — no change from last year.
What This Means for Your Business?
These updates aren’t major, but they do reflect the rising cost of vehicles and running a business in general. Whether you’re planning to upgrade your company car, reimburse your team for mileage, or provide a vehicle as part of a compensation package, these changes help ensure the deductions and benefits stay aligned with real-world costs.
As always, planning and keeping detailed records will help you get the most out of these deductions come tax time.