EV tax write-off: can it be spread over multiple years?

[Blazing Whisper]

Hey folks, has anyone done the $55k+tax EV write-off but spread it over multiple years? The federal government allows 100% of the write-off in the first year but I'm not sure if this means I can instead choose to spread it out, e.g. 50% first year, then 20%, 20%, 10%.

This is a question normally reserved for an accountant but my accountant doesn't have experience with this particular case and the CRA is swamped with tax-deadline questions so it takes hours to wait for someone to speak with.

 

[Wonderland]

I have CRA a call about this and you can claim 100% up until 2024…But I’d like to hear people’s experience aswell

 

[Asif]

If you wanted to split it over the course of multiple years, couldn't you use the regular CCA schedule to depreciate it? Then you aren't limited to 55k, and could do the full amount?

 

[coolmanfever]

I spoke to my accountant last year when I got my model 3. Turn out you can only exercise EV tax if you can prove the EV is for business use.

 

[Blu-Ion]

If you declare 70% business use on your personal income tax then can you deduct it? I read the working and seems confusing, mostly seems to refer to Businesses buying the vehicles, not individuals for business use

70% of $55k is still a nice amount

 

[Warpdryv]

If you declare 70% business use on your personal income tax then can you deduct it? I read the working and seems confusing, mostly seems to refer to Businesses buying the vehicles, not individuals for business use

70% of $55k is still a nice amount

Yes, business use of your personal vehicle allows you to get the deduction. You'll need a T2200 from your employer.

In Ontario, the deduction is ($55K + 13% HST ) * your % business use. If you're 70% business use from the date you buy the car to Dec 31st, then your deduction would be $43,505. At the top marginal rate, that's just over $20K coming back to you.

Keep in mind there are clawback rules if you sell the car after a short period, similar to the recapture rules with regular cars but a little more strict. You can call your CPA or you can google and read on the CRA website, which isn't too bad actually.

If you own the business, there may be other options (ie: pay yourself a tax-free allowance), but in that case you definitely want to talk to your CPA.

 

[Warpdryv]

Hey folks, has anyone done the $55k+tax EV write-off but spread it over multiple years? The federal government allows 100% of the write-off in the first year but I'm not sure if this means I can instead choose to spread it out, e.g. 50% first year, then 20%, 20%, 10%.

This is a question normally reserved for an accountant but my accountant doesn't have experience with this particular case and the CRA is swamped with tax-deadline questions so it takes hours to wait for someone to speak with.

CCA is an optional deduction, so you should be allowed to select the amount that you take each year.

However, even if that is the case, many tax software packages don't allow for specific situations like these, so your accountant may need to call their provider for a software update.

In my case I took it all in the first year, and then after that it wasn't worth tracking expenses/mileage anymore since the electricity and maintenance costs are so low.

 

[Heynow999]

Thanks Warpdryv

I have asked questions about class 55 vehicles on other forums and and never gotten clear answers. I even asked my accountant and he didnt know.

I have a business but I am not incorporated. I manage rental properties and I have written off vehicles and a home office for decades. Do you see any reason why I cant use the rebate? I plan on buying a new Y and owning it personally. I have a utility trailer that I tow behind my model 3 to move lumber. etc and I will now tow it behind the Y. Im basically buying the Y for this tax deduction because at this point I get alomost zero tax benefit from my model 3.

I also would like to spread out the deduction to knock me down to $97k income. I know this year I wont be a great year but next year I could probably use a lot of the deduction.

any thoughts?

 

[Funkmobile]

Thanks Warpdryv

I have asked questions about class 55 vehicles on other forums and and never gotten clear answers. I even asked my accountant and he didnt know.

I have a business but I am not incorporated. I manage rental properties and I have written off vehicles and a home office for decades. Do you see any reason why I cant use the rebate? I plan on buying a new Y and owning it personally. I have a utility trailer that I tow behind my model 3 to move lumber. etc and I will now tow it behind the Y. Im basically buying the Y for this tax deduction because at this point I get alomost zero tax benefit from my model 3.

I also would like to spread out the deduction to knock me down to $97k income. I know this year I wont be a great year but next year I could probably use a lot of the deduction.

any thoughts?

When dealing with less than 100% business use cases, you will always need to keep a mileage log of every KM you drive in your car, otherwise there's a chance CRA may reject to all your car related deductions. So if you go to the grocery story, you have mark that down as personal mileage (start odometer reading and end odometer reading). If you go to your rental house you have to mark down as business milage and record the odometer of that trip from start to finish. This is only way an auditor can conclusively determine (and you as well) what percentage of the year that you were using your vehicle for personal or business purposes.

The exact wording on Class 55 CCA class is as follows:

Class 54 (30%) and Class 55 (40%)​

For zero-emission vehicles acquired after March 18, 2019, two new CCA classes are added. Class 54 was created for zero-emission vehicles that would otherwise be included in Class 10 or 10.1, with the same CCA rate of 30%. Class 55 was created for zero-emission vehicles otherwise included in Class 16, with the same CCA rate of 40%. The CCA still applies on a declining-balance basis.


An enhanced first-year CCA deduction with the following phase-out period is available:

• 100% after March 18, 2019, and before 2024
• 75% after 2023 and before 2026
• 55% after 2025 and before 2028

The enhanced first-year allowance will be calculated by:

• increasing the net capital cost addition to the new class for property that becomes available for use before 2028, and applying the prescribed CCA rate for the class as described below:
  • For Class 54, applying the prescribed CCA rate of 30% to:
    • 2 1/3 times the net addition to the class for property that becomes available for use before 2024
    • 1 1/2 times the net addition to the class for property that becomes available for use in 2024 or 2025
    • 5/6 times the net addition to the class for property that becomes available for use after 2025 and before 2028
  • For Class 55, applying the prescribed CCA rate of 40% to:
    • 1 1/2 times the net addition to the class for property that becomes available for use before 2024
    • 7/8 times the net addition to the class for property that becomes available for use in 2024 or 2025
    • 3/8 times the net addition to the class for property that becomes available for use after 2025 and before 2028
• suspending the existing CCA half-year rule

The CCA will be applicable on any remaining balance in the new classes using the specific rate for the new class.


A taxpayer may elect to not include in Class 54 or 55 a vehicle that would otherwise be a zero-emission vehicle or a zero-emission passenger vehicle. When such an election is filed, the vehicle will no longer be considered to be a zero-emission vehicle or a zero-emission passenger vehicle. As a result, the vehicle will be included in its usual CCA Class 10, 10.1, or 16, as the case may be. Such vehicles will not qualify for the enhanced first-year CCA under the zero-emission vehicle rules. However those vehicles, that will be included in Class 10, 10.1, or 16, may be eligible for enhanced CCA under the Accelerated Incentive Investment property (AIIP) rules.


The election must be filed with the Minister of National Revenue in your Income Tax and Benefit Return for the tax year in which the vehicle is acquired. There is no provision for late-filing or amended elections.

The way I interpret the above is if you can only take the 100% (or less) deduction again business income in the first year (the year of acquisition). Otherwise, it you are only entitled to the normal 40% CCA rate in years 2 to infinity.

 

[Wonderland]

If you declare 70% business use on your personal income tax then can you deduct it? I read the working and seems confusing, mostly seems to refer to Businesses buying the vehicles, not individuals for business use

70% of $55k is still a nice amount

Take it to work with you, take pictures, possibly add decals.

 

[Heynow999]

I have another question.

I'm buying a model Y this year, and I might buy a model Y next year for my wife. She helps me with work sometimes so we write off her vehicle at @%50. We havent kept logs, but with the large amounts of money involved with this tax deduction we certainly will, But, my wife doesnt earn very much. How can I get the deduction for the second one? Can I use the first model Y this year, then get a second next year, and let my wife drive the first one? Is that playing fast and loose too much? Basically I want to get the write-off two years in a row.

 

[Blazing Whisper]

I have another question.

I'm buying a model Y this year, and I might buy a model Y next year for my wife. She helps me with work sometimes so we write off her vehicle at @%50. We havent kept logs, but with the large amounts of money involved with this tax deduction we certainly will, But, my wife doesnt earn very much. How can I get the deduction for the second one? Can I use the first model Y this year, then get a second next year, and let my wife drive the first one? Is that playing fast and loose too much? Basically I want to get the write-off two years in a row.

I'm not an accountant but here is what I understand from how this works. Your business can write down the value of the car (up to $55k+tax) if and only if the business owns the car (if you're a sole proprietor, then the car can just go under your name). In your case, you are buying a Model Y this year and you're declaring it under your business so you can do the writedown. Next year, if you get a second Model Y, one of two things have to happen:

A) You can justify having a second car under your business in which case you might be able to claim the second car like normal
B) You have to "sell" your first car and buy the new one. Selling your first car means you have to reclaim the value of the car as income, even if you gave it to your wife (you would have to claim the fair market value of the car even if you didn't get money for it). So you basically wouldn't get the full value of the first writeoff until you depreciate that car over a number of years.

I haven't actually gone through this yet but this is what I have understood so far.

 

[Funkmobile]

I'm not an accountant but here is what I understand from how this works. Your business can write down the value of the car (up to $55k+tax) if and only if the business owns the car (if you're a sole proprietor, then the car can just go under your name). In your case, you are buying a Model Y this year and you're declaring it under your business so you can do the writedown. Next year, if you get a second Model Y, one of two things have to happen:

This is incorrect. Not only must the car be purchased in the name of the company in question (or in the person's name who's generating business income), but the business must prove to CRA that it is using it for business generating purposes. You also have to remember when you get audited, it's not like the civil/criminal law courts, you are actually guilty until you prove yourself innocent.

For example, large corporation ABC has a fleet of cars that their employees use to generate business (sales, service, support etc). Normally, ABC would implement a policy that the employee can only pick up the keys at work and must drop off the keys at work after their shift is over. They are not allowed to drive home with the company vehicle (driving from home to work [and back] is considered personal mileage). If CRA finds that the employees were using the cars for ANY personal purposes (less than 100% business use), they can disallow any and all vehicle related deductions until ABC can prove how much the car fleet was used for business purposes. Going further, CRA can also deem that the employee's use for said vehicle fleet is a taxable benefit (to the employee) and force ABC to add the running costs and depreciation costs of the vehicle to the employee's T4.

B) You have to "sell" your first car and buy the new one. Selling your first car means you have to reclaim the value of the car as income, even if you gave it to your wife (you would have to claim the fair market value of the car even if you didn't get money for it). So you basically wouldn't get the full value of the first writeoff until you depreciate that car over a number of years.

This is partially correct. As mentioned earlier in this thread and what you have alluded to is what's called recpature. Recapture occurs when you sell an asset above the remaining UCC balance (Undepreciated capital cost, or "what's it's worth" in terms of your taxes). Normally your UCC balance goes lower ever year as your take a CCA deduction against your car's UCC balance using a fixed percentage. However, with the new government incentive, they are allowing to deduct the entire amount in the first year and thus brining your UCC balance to 0 immediately. Normally, this never happens as mathematically you would have to goto year 99999 in order to get your UCC balance down to absolute zero. So what this all means is that anytime you sell your car (that you already wrote off 100%), the amount you sold your car for (or gifted to your wife) gets automatically added back into your income (on the year of sale) at 100% inclusing rate. Gifting the company car to your wife is considered a non-arms length transaction so either you or CRA will deem that transaction to have taken place at fair market value.