The types of expenses you are allowed to deduct for your vehicle are:
- License and registration fees
- Fuel
- Insurance
- Repairs and Maintenance
- Interest (if you borrowed to purchase the vehicle)
- Leasing costs if you lease
- Capital Cost Allowance (ie. depreciation) if you own
"Reasonable" is the word you need to consider when deducting expenses. Ask yourself if the expense would seem reasonable to an unbiased third party.
For example, getting an oil change for your car every 5,000 kms would be a reasonable expense to include as repairs and maintenance. Hiring a personal mechanic that you pay $100,000 a year and who changes the oil in your car everyday would likely not be considered reasonable.
If the repair is because you were in an accident the CRA has a different view of the expense depending on when the accident occured. In CRA`s view if the accident happend while the vehicle was being driven for business purposes the full cost of the repair is deductible, if the accident happened while the vehicle was being driven for non-business purposes then none of the cost of the repair is deductible.
If you`re getting 22 inch chrome rims for your vehicle that would not be considered a repair and maintenance expense as that would be making your car better then it was before. An expense that makes your car better then it was originally is added to the cost of the vehicle and then potentially becomes eligible for the capital cost allowance (CCA) deduction.
Taking CCA on your vehicle isn`t a free for all either. You can only take CCA on a vehicle up to a maximum value of $30,000. If you buy a $150,000 sports car as your business vehicle you will only be able to claim CCA as if the car cost $30,000. If you buy 22 inch chrome rims and a new stereo system for your $150,000 sports car it won`t matter from a tax perspective because you have already maxed out the $30,000 you are allowed.
There are similar limits on the interest and leasing costs you can deduct so if you lease your $150,000 sports car you won`t be able to deduct the full leasing costs on your tax return either.