Why Canadian Businesses Should Consider Electric Vehicles

Barbara Britto and Evelyn Jacks

Are more of your clients in the market for an Electric Vehicle? As the global shift toward sustainability gains momentum, Canadian individuals and businesses are increasingly turning their attention to electric vehicles (EVs). Not only do EVs offer long-term operational savings and environmental benefits, but Canada's tax laws also provide substantial financial advantages for business owners. This article explores the key benefits of integrating EVs as a business asset, with a focus on the tax-deductible expenses and financial incentives available in a Canadian context.

OPERATIONAL SAVINGS AND LONG-TERM VALUE

               The most immediate advantage of an EV is the reduction in fuel and maintenance costs. Electricity is generally cheaper than gasoline on a per-kilometer basis, especially when charging during off-peak hours. For example, charging an EV at home or in a commercial depot costs significantly less than filling a gas tank, resulting in a lower total cost of ownership.

               EVs also have fewer moving parts compared to internal combustion engine (ICE) vehicles, which translates to lower maintenance costs. Components such as spark plugs, oil filters, and timing belts are either absent or minimally required, decreasing the frequency and cost of repairs. Over time, these savings can add up, particularly for businesses with delivery fleets or frequent road usage.

A downside? Because they are heavier, EVs may go through tires more quickly – something to budget for. But therein lies an important and alarming irony. According to a study by the Yale School of the Environment and others:

“Seventy-eight percent of ocean microplastics are synthetic tire rubber, according to a report by the Pew Charitable Trust. These fragments are ingested by marine animals — particles have been found in gills and stomachs — and can cause a range of effects, from neurotoxicity to growth retardation and behavioral abnormalities.

And:

“Tire emissions from electric vehicles are 20 percent higher than those from fossil-fuel vehicles.”

It’s a moral dilemma worth exploring before making the decision to buy an EV.

TAX DEDUCTIBILITY AND DEPRECIATION IN CANADA

               A major advantage for business owners in Canada lies in the favorable tax treatment of EVs under the Income Tax Act. Businesses can write off a significant portion of the cost of eligible zero-emission vehicles (ZEVs) through accelerated capital cost allowance (CCA) or the Designated Immediate Expensing Program (DIEP).

               There are two CCA classes for zero-emission vehicles acquired after March 18, 2019. Class 54 was created for zero-emission vehicles that would otherwise be included in Class 10 or 10.1, with the same CCA rate of 30%. Class 55 was created for zero-emission vehicles otherwise included in Class 16, with the same CCA rate of 40%. The CCA still applies on a declining-balance basis. For the accelerated capital cost allowance, the  enhanced first-year CCA deduction with the following phase-out period is available:

• 100% after March 18, 2019 and before 2024
• 75% after 2023 and before 2026
• 55% after 2025 and before 2028

For the DIEP method  the EV is eligible for a 100% immediate expensing subject to the 1.5million asset threshold. The maximum capital cost eligible for the write-off is $61,000 (as of 2025) plus applicable sales taxes. This means that businesses can claim the full cost of the vehicle (up to the limit) as a tax deduction in the year the vehicle is put into use, rather than depreciating the cost over several years. This creates significant cash flow and tax planning advantages.

OPERATING COSTS AS TAX DEDUCTIONS

               Beyond depreciation, ongoing operating expenses for EVs are tax-deductible if the vehicle is used to earn business income. These include:

• Electricity or charging fees (including public charging subscriptions)
• Insurance premiums
• Maintenance and repairs
• Lease payments (if leasing instead of buying)
• Parking fees and tolls (when related to business use)
• Interest on money borrowed to purchase the EV

For businesses that use their vehicles for both personal and professional/business purposes, only the portion attributable to business use is deductible. Accurate record-keeping, including mileage logs and expense receipts, is essential to justify these deductions.

               There are several fee-based charging options available across North America. Most stations are run by EV charging network operators that provide electricity to EV owners for:

• a time-based fee (charge per amount of time) billing
• a flat fee (charge per use, charge per month)
• a fee based on the rate of charging (kilowatt-hours or kWh)
• a combination of the above options

Time-based and flat fee billing methods are most commonly used in Canada and other countries, as they have allowed the EV charging infrastructure to grow quickly to support of EV adoption,

To assess the energy cost for Energy ownership Natural Resources Canada’s fuel consumption ratings tool is not just for owners of gas-powered vehicles but also to calculate the energy consumption of an electric vehicle and estimate annual electricity costs of ownership.

The Bottom Line. Switching to an electric vehicle for business use in Canada is no longer just an environmental decision—it's a strategic financial move. With generous tax deductions and ongoing operational savings, EVs offer both immediate and long-term benefits for businesses of all sizes. The federal iZEV program, which provided rebates of up to $5,000 for new EVs, has been paused. There are some provincial rebates that are still in effect.  

As Canada moves towards a low-carbon economy, investing in EVs today positions a company as a forward-thinking, financially savvy, and environmentally responsible enterprise.

However, all the research on the effect of EVs has not been completed. Read the fine print on the real environmental impacts over the long term.