CRA confirms that where a vehicle is used both personally and for business by a self-employed worker, there is a choice between a simplified method, and that under ss. 13(7)(c) and (d)

CRA considers that the CCA deduction for the motor vehicle of a self-employed worker that is used for both business and personal use can be computed by determining the amount of CCA in respect of the motor vehicle as if it were used entirely for business purposes, while deducting annually only the proportion of CCA corresponding to the business use in the particular year.

In 2022, a self-employed worker acquired a passenger vehicle at a cost of $50,000, so that $34,000 was included in Class 10.1. The business-use percentage in 2022 was 40%, and the individual designated the property as designated immediate expensing property, giving rise to a CCA claim of $13,600 for 2022.

In 2023, he sold the passenger vehicle for $38,000. Since the cost to him of the passenger vehicle (a designated immediate expensing property per Reg. 1104(3.1)) was higher than the Reg. 7307(1) limit, s. 13(7)(i) provided that the proceeds of disposition were computed as: $38,000 X $34,000/ $50,000 = $25,840, resulting in recapture of depreciation. However, multiplying this amount by the increased business-use percentage for 2023 of 60% produced an inclusion $15,504, which exceeded the previous CCA claim.

In agreeing with this calculation, CRA confirmed that, in using the above method, recapture of depreciation was to be included in the proportion corresponding to the business use in the year of disposition (i.e., 60%). However, CRA seemed to effectively indicate that the individual had the choice between the above simplified administrative method and the method actually contemplated by ss. 13(7)(c) and (d), provided that such choice was consistently applied. In this example, there presumably would have been a better result applying s. 13(7)(d)(i) since it would have deemed there to be a capital cost increase based on the increased 20% business use at the beginning of 2023, so that there would have been a larger UCC pool to partially absorb the subsequent business proceeds.

Neal Armstrong. Summary of 10 October 2024 APFF Roundtable, Q.11 under s. 13(7)(d).