As a self-employed business owner, you may think of buying a car for your corporation. You may use the vehicle for company purposes, such as driving to your clients. The car can also be used for other business tasks such as deliveries.
Whatever the case, it is necessary to think thoroughly before buying a car. After all, leasing is also possible in Canada. So if you want to know more about buying a car under a corporation, you’re in the right place.
Let’s dive into the specifics of buying a corporation vehicle.
What Does Buying A Car Under A Corporation Mean?
Buying a car under a corporation means that the vehicle will be owned by your company. You will be its rightful passenger and can use it for different business purposes. The best thing about this option is that it will reduce your tax liability.
Remember buying a car is different than leasing it because you will be the owner. You can also get tax depreciation benefits for the vehicle if you have purchased it. This may not be the case with a leased car.
Benefits Of Buying A Car Under A Corporation In Canda
Here are some benefits of buying a car for your corporation to make a wise decision:
- Allows Tax Depreciation
Tax depreciation is the main benefit of buying a corporation car and will help relieve your tax burden. The Canadian Revenue Agency allows the cost to be deductible by Capital Cost Allowance. Your vehicle will be given a specific category under this option.
A car may be tagged 10 or 10.1, depending on its price. If your vehicle falls under these categories, you can get up to 30% tax depreciation. However, vehicles with 10.1 have a maximum depreciation limit of $36,000.
The category is determined by the car’s price before applying taxes. If the vehicle was above $36,000, it would be tagged as 10.1.
- Benefit The Clients And Employees
Having a company car is best for businesses with high-profile clients or international clients. Your clients may ask you to drive them in the company car to a meeting with your other partners. You can also offer the vehicle to employees who struggle with commuting to work.
So a company car can enhance productivity by ensuring your workers reach the office on time. It will also allow your clients to have more faith in your services. The vehicle will also help you reach different meetings outside your office on time.
Should I Buy A Car Under A Corporation In Canada?
You should consider some things before buying a car under a corporation in Canada. The top factor is your needs and the price of the vehicle. It is also necessary to consider how many vehicles you need.
Figuring out these things will help you determine whether the car is actually needed or not. This will be best for saving money if the uses of a vehicle are not extensive in your corporation.
This is all about buying a car under a corporation in Canada. Consider all important factors, such as your needs and budget, to decide whether buying the vehicle will be feasible and profitable for the company.