Acquired new car

[mere24]

Hi there,

I am a small business owner (not incorporated).  I purchased a new vehicle (used for both personal and business use) in March 2023.  I understand that I only enter the purchase amount on the "description and amount of capital additions of AIIP", correct? Do I carry over and enter all the information for my old car, which I traded in to put towards the purchase of the new vehicle?  Do I qualify for DIEP?

[Geo123]

Hello mere24,

T2125 - Vehicle Acquisition

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You have changed your vehicle in the tax year, and both vehicles - the old and the new - are in Class 10.1, i.e. cars whose value exceeds $30,000 before taxes.

According to CRA rules, you must enter the information for each vehicle separately, that is in two separate 10.1 categories.

1- In the "Left side menu on the Interview tab", select "Self-employment income" and on the right-hand page that appears, select the type of income that applies to your situation.
2- Complete the "Business ID" and "Income, expenses" pages. Click on "Next" at the bottom of the page.
3- In the page ''Motor vehicle expenses'', if you used the same software last year the basic information of your old vehicle will have been transferred.  If not, choose the option ''Purchased motor vehicle'', enter the information for your first car, including the ''Opening balanced of the undepreciated capital cost'', the class, the kilometers travelled for business and also the total kilometers travelled during the year.
4- For the line "Adjusted cost base of the vehicle", enter the ACB of the vehicle sold.
5- In the third (3rd) section "Disposition of the vehicle", enter the information on selling your old vehicle. As the price sold you enter the total amount on line "Proceeds of disposition of an asset".
6- For the line "ABC of the disposition", enter the Adjusted Cost Base of the vehicle sold.
7- At the line "Did you liquidate all assets in this class?" the answer is "Yes".
8- For the line "ACB of the disposition", indicate the total amount received in payment. If the proceeds of the disposition of the property exceed the ACB, the result will be a capital gain.
9- In this case, return to "Interview setup" and choose "Investment income and expenses" icon, check "Capital gains (or losses) and capital gain history" and click "Next" at the bottom of the page.
10- You must enter the gain separately under the section "Capital gains (or losses) & ABIL" and on the screen to the right, select "Real estate and other depreciable property" option.
11. Click on "Arrow" between "Next" and "Previous" the "Vehicle expenses" page will appear, click the plus sign "+" left of "Purchased motor vehicle".
12- A page will open called "Purchased vehicle" enter in this page information on this new vehicle. On line "Opening balance of the undepreciated cost" do not enter any amount;
13. As with the previous vehicle, enter expenses for this new vehicle during the tax year, the total mileage traveled and traveled to the business purposes;
14- In the second section of this page "Addition of a vehicle" on the line "Description of the vehicle and vehicle cost" enter the price paid for the new vehicle, and a brief description;
15- On line "Application of half-year rule to current year additions" select "Yes" from the menu;
16- If you want to limit the CCA on line "Limit to the CCA of this vehicle (leave blank for maximum CCA)", enter the desired amount. Otherwise, leave blank to get the maximum CCA.

The program will carry over the amounts on lines 9281 and 9936 of federal form T2125 and on lines 220 and 240 of Quebec form TP-80. In addition, please note that in Area A, "Calculation of capital cost allowance (CCA) claim", in column 3 titled "Cost of additions in the year" the amount entered by the program will be $ 30,000 plus all applicable taxes.

Also, if you made a capital gain, Schedule 3 and schedule G for Quebec residents, will be generated by the program.

We recommend that you keep a record of all expenses and a daily mileage log of your vehicle.

We recommend that you consult the CRA guide by clicking on the following link:

http://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/business-expenses/motor-vehicle-expenses.html

 

DIEP

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Immediate expensing of up to $1.5 million per year

Budget 2021 included proposals to provide temporary immediate expensing in respect of certain property acquired by a Canadian-Controlled Private Corporation (CCPC).

This immediate expensing would be available for “eligible property” acquired by a CCPC on or after April 19, 2021, and that becomes available for use before January 1, 2024, up to a maximum amount of $1.5 million per taxation year. The immediate expensing would only be available for the year in which the property becomes available for use. The $1.5 million limit would be shared among associated members of a group of CCPCs. The limit would be prorated for taxation years that are shorter than 365 days. The half-year rule would be suspended for property for which this measure is used. For those CCPCs with less than $1.5 million of eligible capital costs, no carry-forward of excess capacity would be allowed.

Eligible property under this new measure would be capital property that is subject to the capital cost allowance (CCA) rules, other than property included in CCA classes 1 to 6, 14.1, 17, 47, 49 and 51, which are generally long-lived assets.

https://www.canada.ca/en/department-finance/news/2022/02/expansion-of-the-eligibility-for-tax-support-for-business-investments.html