The government in its latest federal budget has put aside $300 million as an incentive to purchase zero emission vehicles (ZEV). The monies will be spread over three years and will give buyers $5,000 toward the purchase of a ZEV. The incentive applies only to vehicles with a maximum purchase price of $45,000. Currently only a handful qualifies, including the Nissan Leaf, Chevrolet Bolt, Hyundai Ioniq, Kia Soul EV and Smart EQ. However, expect more manufacturers to adjust their pricing to fall under this $45,000 target.
If you don’t qualify for the rebates above there are still further tax benefits of purchasing an energy efficient vehicle. If you operate a car for business purposes, the government also allows you to write off 100 per cent of the purchase price of the car, to a maximum amount of $55,000 plus sales taxes. The 100 per cent write off is only available in the year of purchase and will run from 2019 – 2023. The vehicle must be new, fully electric, or a plug-in hybrid (with a battery capacity of at least 15 kWh), or fully powered by hydrogen.
Here is an illustration on a $55,000 vehicle purchase. If 80 per cent of the vehicle use is for practice purposes, your maximum deduction in the year of purchase is $44,000, which is 80 per cent of $55,000.
If you later sell this car for $25,000, then you must report 80 per cent or $20,000 as income in the year of disposition.
As a result of the government incentives for energy efficient vehicles, there will be fewer Canadians at the gas pump and this will have a huge impact on government revenues. Just think of TransLink, which in 2017 took in $374 million in fuel tax revenues to pay for operating expenses and capital expenditures. If fuel tax revenue drops, TransLink and other government agencies will be forced to look for ways to make up for the losses. And there is no shortage of ideas, including taxing personal vehicles based on the distance travelled. When it comes to taxing citizens, the government imagination is limitless.
