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If I sell my car off at a loss, can I write that loss off against my income to save on tax? Does it matter if the car was used just for personal leisure use, or if I used the car to generate business income? (e.g. travel to work, to attend education seminars, etc.)

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While you'd need to pay tax if you realized a capital gain on the sale of your car, you generally can't deduct any loss arising from the sale of "personal use property". Cars are personal use property.

Refer to Canada Revenue Agency – Personal-use property losses. Quote:

[...] if you have a capital loss, you usually cannot deduct that loss when you calculate your income for the year. In addition, you cannot use the loss to decrease capital gains on other personal-use property. This is because if a property depreciates through personal use, the resulting loss on its disposition is a personal expense.

There are some exceptions. Read up at the source links.

  • Thanks a lot. But if I use the car to generate income (i.e get to work, lease it out for a day), is it still considered personal use or does it qualify as business expense? – Victor123 Jan 31 '14 at 15:58
  • The loss on the sale of the car doesn't qualify as a business expense. If you were claiming a portion of your car expenses as a business expense, you would have had an opportunity, each year, to claim a portion of the Capital Cost Allowance (CCA) for the vehicle. CCA is a form of depreciation. Did you do that? – Chris W. Rea Jan 31 '14 at 17:15
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    Have a look at Form T777 (PDF) ... the middle section on the first page is for calculating your allowable automobile expenses. Line 9 is the capital cost allowance, and the next page in the document describes how to calculate it. You'll also want to refer to Guide T4044 (PDF). Note that if you are an employee, you can only claim such expenses if your employer provides you with a T2200 slip permitting such. Only some kinds of employees can deduct car expenses -- most cannot. – Chris W. Rea Jan 31 '14 at 18:27

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