The Contractor's Vehicle Cost Trap (And How Smart Alberta Contractors Escape It)

When Your Truck Owns You Instead of the Other Way Around

Sure, you're crushing it on job sites, landing solid contracts, and the work's steady. But when you sit down to look at your finances, that $800 truck payment stares back at you like a hungry wolf. Add in fuel, insurance, maintenance, and repairs, and suddenly you're wondering if you're working to pay for a truck or actually making money.

A truck is usually one of your most essential tools, so it’s important to have the right one and keep it maintained. But because it might be one of your biggest expenses, it pays (literally) to make sure you’re getting all you can from it, both in terms of work output and financial benefits. 

Let’s look at some of the ways you can save money on your truck, from payments and maintenance to upgrades. 

The Real Cost of Getting It Wrong

Let's talk numbers. Say you're running a $60,000 pickup that you financed. Between payments, insurance, fuel, and maintenance, you're probably looking at around $1,200-1,500 per month just to keep that truck on the road. Over a year, that's $14,400-18,000.

Here's what most contractors don't realize: the Canada Revenue Agency has specific limits on how much you can deduct for vehicles. For 2024, the maximum value you can claim for Capital Cost Allowance is $37,000 plus taxes, even if you paid $80,000 for that truck. So if you bought more truck than you can actually deduct, you're paying for it with after-tax dollars.

And finally, the kicker: if you're not tracking your business kilometres properly, you're probably missing out on thousands in legitimate tax deductions. 

Understanding What You Can Actually Deduct

Here’s the good news for contractors: plenty of vehicle costs are legitimate business deductions when used for earning business income. 

First, there are deductions you can make on vehicle purchase, lease, or loan costs (note that these numbers are based on 2025 allowances):

• Capital Cost Allowance: Most vehicles fall into Class 10 or 10.1, with a 30% depreciation rate. The capital cost ceiling is $38,000 plus taxes for regular passenger vehicles, and $61,000 plus taxes for zero-emission vehicles.

• Lease Payment Limits: Maximum deductible lease payment is $1,100 per month plus taxes for new leases entered into in 2025.

• Interest Deduction Limits: Maximum $350 per month in interest on vehicle loans.

You can also recover costs associated with driving, maintenance, and paperwork:

• Fuel costs for business driving

• Insurance (including supplementary business coverage)

• Licensing and registration fees paid to Alberta

• Maintenance and repairs for business use

• Capital Cost Allowance (depreciation) on the truck itself

• GST/HST you paid on vehicle purchases and expenses (you can recover this through your business)

The Canada Revenue Agency's motor vehicle expenses guide provides complete details on what you can and can't claim.

The key phrase in most of these deductions is "business use." Only the portion of your vehicle expenses related to business use is deductible. Personal use expenses don't count!

So if you use your truck 70% for business and 30% for personal driving, you can deduct 70% of your eligible vehicle expenses.

The Logbook That Pays for Itself

Here's where most contractors either make or lose thousands: documentation. The CRA requires detailed records of your business driving, and motor vehicle expenses can only be deducted if they're reasonable and you have receipts to back them up.

Here’s what you need to track for every business trip:

• Date and destination of each trip

• Purpose of the trip (job site visit, material pickup, client meeting)

• Kilometres driven for business purposes

• Starting and ending odometer readings to verify distance

I know what you're thinking: "Jessica, I barely have time to eat lunch, let alone write down every damn trip." But here's the thing: that logbook could be worth thousands in tax savings. A contractor driving 30,000 business kilometres per year could easily save $4,000-6,000 in taxes just by tracking properly.

The good news is you don't need to track every single trip forever. After establishing a base year with complete records, you can use a 3-month sample each year as long as your business use percentage stays within 10% of your base year.

Plus, there are plenty of apps that can help you out by tracking your driving, like QuickBooks. Then it’s just a quick swipe to tell the app whether it’s a business or personal trip and you can download your results and send them off to your accountant at tax time.

When Professional Help Pays for Itself

Look, you're good at what you do. You can frame a house, run electrical, or fix anything with an engine. But unless you're also a tax expert, there's real value in getting professional bookkeeping and accounting help for your vehicle expenses.

A good accountant who understands what contractors really need (and what they don’t want to deal with) will:

• Set up your tracking systems properly from day one

• Make sure you're claiming every legitimate deduction

• Help you plan vehicle purchases to maximize tax benefits

• Handle the paperwork so you can focus on making money

The money you save on taxes and the time you save on paperwork usually pays for professional help several times over. Plus, you'll have peace of mind knowing your vehicle expenses are handled properly if the CRA ever has questions.

Ready to get your vehicle expenses working for you instead of against you? Book a Profit Clarity Call and let's look at your specific situation. We'll show you exactly how much you could be saving and set up systems that actually work for contractors who don't have time for complicated record-keeping.

Stop working for your truck payment and make your truck payment work for you!