Self-Employment Commission Income and Purchased Car Rules
What This Note Covers
How commission income is taxed when you are self-employed.
The difference between a self-employed commission salesperson and a commissioned employee.
How CRA vehicle deduction rules work when you buy or lease a car for commission income.
What a CAD 50,000 car typically allows you to claim.
First Distinction: Self-Employed Or Employee
Self-Employed Commission Income
If you are carrying on your own business and earning commissions as an independent agent, this is self-employment income.
It is generally reported on Form T2125.
It flows to the commission income lines of your T1 return, usually line 13899 for gross commission income and line 13900 for net commission income.
You can generally deduct reasonable business expenses you incurred to earn that income.
Commission Employee
If you are an employee who earns commissions from an employer, this is employment income, not self-employment income.
It is generally reported on a T4.
Your commissions are included on line 10120.
Vehicle and other expense claims usually require Form T777 and employer certification such as T2200.
Why This Distinction Matters
Self-employed commission income uses business-expense rules and T2125.
Commission employee claims use employment-expense rules and are more restricted in some areas.
If your status is unclear, CRA looks at the real working relationship, not just the title.
How Self-Employed Commission Income Is Reported
Report all commission revenue you earned from your activity.
Keep records for:
invoices,
commission statements,
deposits,
contracts,
expense receipts,
mileage logs.
Self-employed commission income can generally be reported using the cash method or the accrual method under CRA guidance.
If you have net self-employment income, you may also owe CPP on that income.
Vehicle Rules: The Big Picture
You Can Only Deduct The Business Portion
If you use the car for both business and personal driving, only the business-use portion is deductible.
The usual formula is:
business kilometres,
divided by total kilometres,
multiplied by eligible expenses.
Records Are Critical
Keep:
odometer readings at the beginning and end of the year,
a mileage log for business trips,
receipts for fuel, insurance, repairs, financing, lease, and registration.
CRA specifically expects total kilometres and business kilometres.
Parking And Supplemental Business Insurance
Parking fees related to business trips are generally deductible.
Supplementary business insurance is generally deductible.
If You Buy A Car
You Do Not Deduct The Full Purchase Price At Once
A purchased car is usually capital property.
You normally deduct it over time through CCA, not as a full one-year expense.
Most Regular Cars Are Passenger Vehicles
Most cars, SUVs, and many small vans are passenger vehicles for CRA purposes.
Passenger vehicles are subject to deduction limits on:
CCA,
interest,
leasing costs.
CCA Limit For A Regular Passenger Vehicle
For passenger vehicles acquired on or after January 1, 2025, the Class 10.1 ceiling is CAD 38,000 before sales tax.
This means if you buy a regular passenger car for more than that amount, you do not get CCA on the full price.
You get CCA only on the capped amount plus the applicable sales tax calculated on that capped amount.
First-Year Rule
The normal CCA rate for Class 10 and Class 10.1 is 30%.
In many standard cases, the half-year rule effectively limits the first-year claim to about half of the normal rate.
In practical terms, the first-year CCA on a capped passenger vehicle is often about 15% of the capped tax basis, before applying your business-use percentage.
Example: You Buy A CAD 50,000 Regular Car
Assumption
Assume the CAD 50,000 is before sales tax.
Assume it is a regular passenger vehicle, not a qualifying zero-emission vehicle.
What You Cannot Do
You generally cannot deduct the full CAD 50,000 in the year of purchase.
You also cannot calculate CCA on the full CAD 50,000 if it is a passenger vehicle.
What You Usually Can Do
For CCA, CRA usually caps the depreciable cost at CAD 38,000 plus sales tax on that capped amount, not on the full CAD 50,000.
If the vehicle is used partly for business, you then multiply the allowable CCA by your business-use percentage.
Rough First-Year CCA Example
Base CCA ceiling before tax: CAD 38,000.
First-year rate in a standard case: about 15%.
Rough first-year CCA before business-use proration and before tax effect: about CAD 5,700.
Then reduce that to your business-use share.
If Business Use Is 60%
Rough first-year CCA on the capped amount before tax effect:
CAD 5,700 x 60% = CAD 3,420.
Sales tax on the capped amount can increase the CCA base somewhat, depending on province.
Ongoing Deductions You May Also Claim
Subject to business-use percentage, you may usually deduct:
fuel,
insurance,
maintenance and repairs,
licence and registration,
business parking,
eligible loan interest,
CCA.
If You Finance The Car
Interest Is Potentially Deductible
Interest on money borrowed to buy the vehicle can be deductible if the vehicle is used to earn business income.
For a passenger vehicle bought in 2025, CRA states there is a daily cap on deductible interest.
2025 Interest Limit
The deductible interest limit is the lesser of:
actual interest paid, or
CAD 11.66 times the number of days interest was payable in the year.
After that, you still apply your business-use percentage.
If You Lease The Car
Leasing Has Its Own Limit
If you lease instead of buy, CRA limits the deductible lease cost for passenger vehicles.
For new leases entered into on or after January 1, 2025, the monthly lease deduction ceiling is CAD 1,100 before tax.
There is also a formula-based restriction in some cases, especially for higher-value vehicles.
Simple Practical View
Leasing can make cash flow easier, but it does not let you fully bypass CRA passenger-vehicle limits.
What If The Car Is Zero-Emission
Different CCA Class
A qualifying zero-emission passenger vehicle may fall into Class 54.
For 2025, the capital cost limit is CAD 61,000 before tax.
This can be more favorable than the regular passenger-vehicle cap, but special rules apply.
What You Should Usually Do With A CAD 50,000 Car
Track business and personal mileage carefully from day one.
Decide whether the car is owned personally or by the business before trying to deduct expenses.
If it is a regular passenger vehicle, expect the CCA claim to be capped.
Claim only the business portion of operating costs.
Keep financing and lease documents because the interest and lease formulas matter.
Do not assume the sticker price equals the deductible tax basis.
Common Mistakes
Claiming 100% of vehicle costs when the car is also used personally.
Using no mileage log.
Deducting the full purchase price instead of CCA.
Ignoring the passenger-vehicle cost cap.
Mixing up self-employed commission rules with commissioned employee rules.
Forgetting that home-to-regular-work travel is usually personal in employee contexts, and mixed-use questions still need careful support in business contexts.
Quick Summary
If you are truly self-employed and earn commission income, you generally use T2125.
If you are a commission employee, you generally use T777 and need employment-condition support such as T2200.
A purchased CAD 50,000 regular car is usually not fully deductible.
For a regular passenger vehicle bought in 2025, CCA is generally capped at CAD 38,000 before tax.
First-year CCA is usually much smaller than people expect, and then it is reduced again by business-use percentage.
Financing interest and lease costs are also subject to CRA limits.