How to Write Off a Truck or Van as a Business Expense in Canada

Running a Canadian business often means putting serious kilometers on your vehicle. Whether you're a contractor hauling equipment to job sites, a delivery driver navigating city streets, or a consultant meeting clients across town, your truck or van serves as more than transportation, it's an essential business tool. The good news is that the Canada Revenue Agency recognizes this reality and allows you to write off a truck or van as a business expense in Canada, potentially saving thousands of dollars on your annual tax bill.

Understanding how to properly claim these deductions requires navigating specific rules and maintaining detailed records, but the effort pays off significantly. This guide walks you through everything you need to know about maximizing your vehicle tax deductions while staying compliant with CRA requirements.

Understanding Vehicle Write-Offs for Canadian Businesses

When you use a vehicle for business purposes, the CRA allows you to deduct a portion of your vehicle expenses proportional to your business use. This principle sounds straightforward, but the implementation involves understanding two distinct categories of deductions: operating expenses and capital cost allowance.

Operating expenses cover the day-to-day costs of running your vehicle, such as fuel, insurance, and maintenance. These expenses get deducted in the year you incur them. Capital cost allowance, on the other hand, represents the depreciation of your vehicle over time. When you purchase a truck or van for business use, you can't deduct the entire purchase price immediately. Instead, you claim a percentage of the vehicle's declining value each year according to CRA's prescribed rates.

The foundation of any vehicle expense claim rests on proper documentation. The CRA expects you to maintain records that clearly demonstrate your business use percentage and support every expense you claim. This documentation becomes your defense if the CRA ever questions your deductions, making it essential to establish good record-keeping habits from day one.

Qualifying Your Truck or Van as a Business Vehicle

CRA's Definition of Business Use

The CRA considers vehicle use as business-related when you drive to earn income or conduct business activities. This includes traveling between job sites, visiting clients or suppliers, making deliveries, and transporting tools or equipment. Even trips to the bank for business deposits or meetings with your accountant count as business use.

However, the CRA draws a clear line at commuting. Driving from your home to your regular place of business doesn't qualify as business use, even if you stop for coffee with a client along the way. This distinction catches many business owners off guard, particularly those who work from home occasionally but maintain a separate office or shop.

Passenger Vehicles vs. Commercial Vehicles Classification

One of the most critical distinctions in vehicle tax deductions involves the classification of your truck or van. The CRA imposes strict limits on "passenger vehicles," capping the depreciable amount at $36,000 (before taxes) for vehicles purchased in 2024. However, certain trucks and vans escape these limits when they qualify as motor vehicles rather than passenger vehicles.

To qualify for the higher deduction limits, your vehicle must meet specific criteria. Vans need to seat no more than three people, including the driver, or be used 90% or more for transporting goods or equipment in the year of purchase. Pickup trucks must have a seating capacity of no more than three or be used primarily (more than 50%) for transporting goods or equipment.

Calculating Your Business Use Percentage

The Logbook Method

The most reliable way to establish your business use percentage involves maintaining a detailed logbook. For your first year claiming vehicle expenses, the CRA expects you to keep a full logbook for an entire 12-month period. This logbook should record the date, destination, purpose, and kilometers for every business trip, along with your odometer reading at the start and end of each year.

After establishing a base year with a full logbook, you can use a simplified approach in subsequent years. This involves maintaining a logbook for a sample three-month period and comparing it to your base year. If your business use remains consistent (within 10%), you can apply the sample period percentage to the entire year.

Reasonable Estimate Approach

While the CRA prefers logbooks, they may accept reasonable estimates supported by other documentation. Appointment calendars, delivery schedules, and client invoices showing service locations can help substantiate your business use claims. However, relying solely on estimates increases your audit risk, particularly if you claim high business use percentages.

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Types of Vehicle Expenses You Can Deduct

Operating Expenses

Your deductible operating expenses encompass all costs associated with running your vehicle throughout the year. Fuel and oil represent the most common expenses, but don't overlook insurance premiums, license and registration fees, maintenance and repairs, car washes, and parking fees related to business activities. Each expense must be multiplied by your business use percentage to determine the deductible amount.

For example, if your annual vehicle expenses total $12,000 and your business use percentage is 75%, you can deduct $9,000 as a business expense. Keep every receipt and organize them by category to simplify year-end calculations and potential audits.

Capital Cost Allowance (CCA)

When you purchase a truck or van for business use, you claim the depreciation through capital cost allowance. Most vehicles fall into Class 10 (30% declining balance) or Class 10.1 (30% declining balance with special rules for passenger vehicles exceeding the prescribed limit). In your first year, the half-year rule typically applies, limiting your CCA claim to half the normal rate.

The calculation becomes more complex for expensive vehicles. If your passenger vehicle costs more than $36,000 before taxes, you must create a separate Class 10.1 and base your CCA on the $36,000 limit rather than the actual purchase price. This restriction doesn't apply to qualifying commercial vehicles, making the classification distinction particularly valuable for businesses purchasing expensive trucks or vans.

Leasing Costs and Interest

Leasing offers an alternative to purchasing, with monthly lease payments being deductible based on your business use percentage. However, the CRA imposes limits on lease deductions for expensive vehicles, similar to the purchase price restrictions. The deductible lease amount gets calculated using a formula that considers the manufacturer's suggested retail price and compares it to the prescribed limits.

If you finance your vehicle purchase, the interest portion of your loan payments is deductible, again subject to your business use percentage and potential limits for expensive vehicles. The principal portion of loan payments isn't directly deductible, as it's reflected in your CCA claims instead.

Maximizing Your Vehicle Tax Deductions

Strategic planning can significantly increase your vehicle-related tax deductions. Timing your vehicle purchase near year-end allows you to claim six months of CCA even if you only use the vehicle for a few weeks, thanks to the half-year rule. Consider whether buying or leasing provides better tax advantages for your situation, factoring in your expected business use, cash flow needs, and the vehicle's projected lifespan in your business.

For businesses expecting to use vehicles almost exclusively for business purposes, structuring ownership through your corporation rather than personally can simplify expense tracking and eliminate the need to calculate business use percentages. However, this approach requires careful consideration of insurance implications and potential taxable benefits if any personal use occurs.

How Modern Banking Solutions Simplify Vehicle Expense Management

Managing vehicle expenses becomes significantly easier when you maintain clear separation between business and personal finances. Modern business banking platforms that integrate with accounting software can automatically categorize fuel purchases, insurance payments, and maintenance costs, eliminating hours of manual bookkeeping.

Using a dedicated business credit card for all vehicle expenses creates an automatic paper trail that supports your tax claims. When these transactions flow directly into your accounting system with proper categorization, you're always ready for tax time without scrambling to organize receipts or reconstruct business trips.

The ability to generate detailed expense reports instantly helps you monitor your vehicle costs throughout the year, identify opportunities for savings, and ensure you're capturing every deductible expense. This real-time visibility into your vehicle expenses also helps with budgeting and cash flow management, particularly important for businesses where transportation represents a significant operational cost.

How to Manage Your Business Vehicle Expenses with Venn

Tracking truck expenses doesn’t have to mean chasing receipts or digging through spreadsheets at tax time. If you’re managing multiple vehicles or projects, that old-school process wastes hours you could spend running your business.

Venn makes expense tracking effortless.

• Snap and upload receipts in seconds, tagged by truck, project, or team
• Auto-categorize every fuel, maintenance, and insurance cost
• Sync seamlessly with QuickBooks or Xero for instant reconciliation
• Export clean, CRA-ready reports in one click

Spend less time reconciling and more time growing. Whether you operate one truck or an entire fleet, Venn keeps your finances organized, compliant, and ready when tax season hits.

Common Mistakes to Avoid

The most frequent error business owners make involves claiming 100% business use without proper documentation to support it. Unless your vehicle truly never leaves the business premises except for business purposes, claiming complete business use raises red flags with the CRA. Even if you have another personal vehicle, the CRA may question exclusive business use claims.

Mixing personal and business expenses on the same credit card or bank account creates unnecessary complications when calculating deductions. The time spent separating expenses and the increased audit risk far outweigh any convenience from using a single account. Establishing dedicated business banking and credit facilities eliminates this issue entirely.

Many business owners also forget to track smaller vehicle expenses like car washes, parking meters, and minor maintenance items. While individual amounts seem insignificant, they add up over a year. Developing a habit of photographing receipts immediately and uploading them to your accounting system ensures nothing gets missed.

For new entrepreneurs just starting a small business in Canada, establishing proper expense tracking systems from the beginning prevents these common pitfalls. Having a clear expense policy template helps ensure consistent documentation practices across all business expenses, not just vehicle costs.

Writing off a truck or van as a business expense in Canada requires attention to detail and proper documentation, but the tax savings justify the effort. By understanding the distinction between vehicle classifications, maintaining accurate records, and leveraging modern financial tools to streamline expense tracking, you can maximize your deductions while maintaining full CRA compliance. The key lies in establishing good habits from the start and choosing financial partners that make expense management effortless rather than burdensome.

Disclaimer: This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Venn Software Inc or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional. We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.