Personal vs Business Use of Assets: What Canadian Business Owners Need to Know
Many small business owners in Canada use the same assets — vehicles, equipment, tools, even their home — for both personal and business purposes. While this is common, it comes with important tax implications that can impact your deductions, GST/HST claims, and corporate tax filings.
Understanding how to properly separate personal and business use is essential for accurate bookkeeping, maximising deductions, and staying compliant with CRA requirements.
This guide breaks down everything you need to know.
1. What Does “Personal vs Business Use” Actually Mean?
A business-use asset is something used to earn income. A personal-use asset is something used for everyday life.
Many assets fall into both categories:
- Vehicles used for deliveries and school runs
- Home office spaces used for work and family
- Equipment used for side jobs and personal projects
- Farm tools used for both commercial and private land
When an asset is mixed-use, CRA requires you to calculate and claim only the business-use percentage.
2. Why This Matters for Tax Filing
Misreporting business vs personal use affects:
- Income tax deductions
- GST/HST input tax credits (ITCs)
- Capital Cost Allowance (CCA)
- Corporate tax filing (T2)
- CRA audit outcomes
If CRA reviews your return, they will ask how much of the asset is actually used for business — and you must be able to prove it.
3. The Most Common Mixed-Use Assets
1. Vehicles
This is the #1 area CRA consider during audits/reviews.
You must track:
- Business kilometres
- Personal kilometres
- Total annual kilometres
Only the business percentage of fuel, repairs, insurance, leasing, and depreciation can be claimed.
2. Home Office
To claim home-office expenses, the space must be:
- Your principal place of business or
- Used regularly & exclusively to earn income
You can deduct a percentage of:
- Utilities
- Rent
- Internet
- Mortgage interest (limited)
- Property taxes
- Maintenance
3. Equipment & Tools
If tools or equipment (e.g., cameras, machinery, laptops, tractors) are shared, you must prorate the use.
4. Phones & Internet
You can only deduct the portion related to business calls, data, and usage.
4. How CRA Expects You to Separate Use
CRA requires reasonable, supportable records, such as:
- Mileage logbooks
- Receipts
- Digital usage reports
- Calendar or appointment logs
- Work vs personal hour breakdowns
If you can’t show your business-use percentage, CRA may deny the deduction entirely.
5. Asset Depreciation (CCA) Rules for Mixed-Use Assets
Capital assets such as:
- Vehicles
- Farm machinery
- Office furniture
- Computers
- Equipment
are depreciated using Capital Cost Allowance (CCA).
For mixed-use assets, you can only claim the business-use portion.
Example:
A $30,000 vehicle used 60% for business → CCA can only be claimed on $18,000.
6. GST/HST Input Tax Credits (ITCs)
You can only claim ITCs on the business-use portion of:
- Purchases
- Expenses
- Leases
- Repairs
- Equipment
Claiming 100% ITCs for a mixed-use asset is a common CRA audit red flag.
7. What Happens If You Misreport?
CRA may reassess your:
- T1 personal tax return
- T2 corporate return
- GST/HST filings
This can result in:
Denied deductions
GST/HST ITC clawbacks
- Interest charges
- Penalties
- Multi-year audits
Accurate reporting protects your business.
8. How FANS Accounting Helps Clients with Mixed-Use Assets
We support Canadian entrepreneurs, farmers, and corporations with:
- Correct business-use calculations
- Vehicle logbook setup
- Home-office proration
- GST/HST ITC adjustments
- CCA calculations
- Year-end bookkeeping cleanup
- T1 & T2 tax filing
- CRA audit support
Our goal is to help you maximize allowable deductions while staying CRA-compliant.
Conclusion
Personal and business use of assets can get complicated — but with the right records and calculations, you can claim deductions confidently and avoid CRA issues.
Clear separation = Clean books = Strong tax results.
📞 Here Need help calculating your business-use deductions?
👉 Book your Asset Use Review Session with FANS Accounting today.
Disclaimer
This blog is intended for general informational purposes only and should not be taken as tax, legal, or accounting advice. Rules surrounding personal and business use of assets can vary depending on your specific situation. Readers should consult a qualified tax professional or accountant for guidance tailored to their circumstances.
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