Can You Claim Full HST and Car Deductions on a Passenger Vehicle in? CRA Sets Different Limits

If you’re buying a car for your business in 2025, the Canada Revenue Agency (CRA) sets strict limits on how much of that purchase you can deduct. Whether you’re financing or buying outright, you need to know the numbers—and how they apply.

🚗 CRA Car Deduction Limits in 2025

Here are the key limits for passenger vehicles (Class 10.1) in 2025:

• Capital Cost Allowance (CCA) Limit:
  $38,000 before tax (formerly $37,000).
  This is the maximum amount you can depreciate, even if the car costs more.

• Interest Deduction Limit:
  $350 per month maximum for interest on car loans.

These limits apply only to passenger vehicles, not to heavy-duty trucks or zero-emission vehicles, which fall under different rules.

✅ HST Input Tax Credit (ITC): What You Can and Can’t Claim

If you’re a GST/HST-registered business and use your vehicle 90% or more for business, you can claim 100% of the HST as an Input Tax Credit (ITC). However, this doesn’t change the depreciation limit. The CRA still caps your tax deduction at $38,000 before tax.

🧾 4 Real-World Examples to Show How It Works

Example 1: $35,000 Car Purchase

• Cost: $35,000 + HST

• Business Use: 100%

• HST ITC: Full HST claimable

• CCA: Full amount ($35,000) deductible over time because it’s under the $38,000 cap

✅ You’re in the clear. You can deduct the full capital cost.

Example 2: $99,000 Luxury SUV

• Cost: $99,000 + HST (~$12,870 in Ontario)

• Business Use: 100%

• HST ITC: Full $12,870 claimable

• CCA: Limited to $38,000 before tax

🟡 Even though you paid $99,000, CRA only allows CCA on $38,000. You can still claim full HST as an ITC.

Example 3: $113,000 Vehicle

• Cost: $113,000 + HST (~$14,690)

• Business Use: 95%

• HST ITC: Full claim (because use is over 90%)

• CCA: Still capped at $38,000

🛑 You paid over six figures, but CRA says you can only depreciate $38,000. That’s the max for passenger vehicles in 2025.

Example 4: Financing a $45,000 Vehicle

• Monthly Interest: $500

• Interest Deduction: Only $350/month deductible under CRA rules

• CCA: Still capped at $38,000

• HST ITC: Prorated based on business use

⚠️ You’re leaving $150/month of interest non-deductible. Plan accordingly.

💼 Need Help? Book a Consultation

Navigating car deductions and HST rules can be a maze, especially with luxury vehicles or mixed-use scenarios. Don’t guess — talk to a pro.

👉 Book a consultation with Tax4Less.ca
📞 Call: 647‑825‑4243
📧 Email: tax.nehal@gmail.com

🔁 Final Thoughts

• Buying a high-end vehicle? You’ll hit a tax ceiling no matter what you pay.

• Use your vehicle 90%+ for business if you want the full HST refund.

• CRA doesn’t care what you spend — they care what you can deduct.

Know the limits. Optimize your deductions. And keep your books clean.