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Automobile Leasing Cost Limits
As discussed HERE, there are limits to how much a business can deduct for automobile leasing costs for automobiles used in a business.
The Income Tax Act refers to the leasing deductible limit based on the "manufacturers list price". The courts have determined that this means the historical new vehicle list price of the automobile, not the current fair market value price. This interpretation can have some unusual and costly results. Taxpayers may believe that a used vehicle with a current fair value of under $25,000 and consequently low lease payments will not be caught by the lease deduction limits. However, the courts will impose the historical list price of a new vehicle in determining the limits which can result in a significant reduction in the amount that can be deducted for the lease payments.
Caution is warranted when a business leases used luxury vehicles with high manufacturers historical list price for new vehicles.
The leasing limit rules are complex and careful planning for the deductibility of lease payments with a Chartered Accountant is warranted. Contact Keith Anderson CA at (780) 447-5830 if you need advice.
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