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Luxury tax bookkeeping starts with one number: $100,000. A car, SUV or light truck priced above that carries federal luxury tax, which is the lesser of 10% of the price or 20% of the amount over $100,000. Since 5 November 2025 the tax no longer applies to aircraft and boats, so vehicles are what’s left.
How much luxury tax does a vehicle carry?
Below $200,000 the 20% test on the excess is the smaller number. Above it, the flat 10% takes over. The crossover is exactly $200,000, where both give $20,000.
| Price before luxury tax | 20% of amount over $100,000 | 10% of price | Luxury tax |
|---|---|---|---|
| $100,000 | $0 | $10,000 | $0 |
| $120,000 | $4,000 | $12,000 | $4,000 |
| $150,000 | $10,000 | $15,000 | $10,000 |
| $200,000 | $20,000 | $20,000 | $20,000 |
| $250,000 | $30,000 | $25,000 | $25,000 |
The price used is the sale consideration plus improvements the vendor adds, and for imports a retail value. The CRA leaves GST/HST out of it, and also the provincial sales taxes in British Columbia, Saskatchewan, Manitoba and Quebec.
Who deals with luxury tax on their books?
Mostly the seller. The CRA’s registration page says manufacturers, wholesalers, retailers and importers of vehicles above the threshold must register, and they report and pay the tax on their own returns. If you buy from a dealer, the tax arrives already inside the price you pay.
Import a vehicle yourself and you may be the importer. That changes the job entirely, so read the CRA’s registration page before the vehicle lands.
For a buyer, then, the work is on the purchase record. Ask for an invoice that shows the vehicle price, the luxury tax and the HST as separate lines. If they’re rolled into one number, your books can’t say what each part was.
What does GST or HST do to the luxury tax?
It sits on top of it. The CRA says GST/HST applies to the final price including luxury tax, and luxury tax is worked out first. So the price you use for sales tax is bigger than the sticker price.
Take a $150,000 vehicle in Ontario. Luxury tax is the lesser of $15,000 and $10,000, so $10,000. The taxable price for HST is $160,000, and the GST and HST calculator gives $20,800 of HST at 13%. The invoice totals $180,800.
Working backwards from a total? The HST reverse calculator strips out the 13% and returns $160,000, but you still have to split off the luxury tax by hand. The tools here don’t have a luxury tax calculator, so use the table above or the CRA’s formula.
What goes into the books, and where?
For a business, the vehicle is a capital purchase. Book the cost, including the luxury tax, as one asset in the vehicle ledger and set up the depreciation from the date it’s ready for use. HST claimed as an input tax credit is handled separately, and the CRA treats it as government assistance that reduces cost. There’s a 90% business-use test for passenger vehicles that decides when.
Passenger vehicles also have their own depreciation rules, and there may be a dollar cap on the cost you can write off. We couldn’t confirm the current figure, so look it up on the CRA’s motor vehicle pages before you set the schedule, because on a $150,000 vehicle it could change the answer a lot.
A mileage log belongs in the file from day one. So does the contract and the bill of sale. Spreading the payments over a lease or loan? Test the numbers first with the car loan calculator, then record the interest separately from the principal.
Mistakes to avoid
The frequent slip is entering luxury tax as an expense on the day of purchase when it belongs to the vehicle’s cost. That understates your income in year one and can look aggressive later.
Another is assuming every extra is taxed the same way. Extended warranties, certain tire purchases and subscription services are outside luxury tax but still carry GST/HST, according to the CRA. Separate lines on the invoice help here too.
Used vehicles need a check as well. The CRA lists vehicles registered before the tax began on 1 September 2022 among the exempt ones. Don’t assume, though: get the vendor to say in writing why no luxury tax was charged.
And keep records the full six years from the end of the last tax year they relate to. Property records like this one have no end date, so a vehicle file stays until well after you sell.
Where the numbers come from
The threshold, the 10% and 20% formula, the exempt items and the November 2025 change come from the Canada Revenue Agency’s luxury tax pages and its notice on subject vehicles. The ordering with GST/HST comes from its page on consideration and retail value. HST at 13% in Ontario comes from the CRA’s rate table, and the example totals come from this site’s calculator. Tax rules for vehicles do change, so check the CRA before a large purchase.
Frequently asked questions
What is the luxury tax threshold for vehicles?
$100,000. Above it, the tax is the lesser of 10% of the price or 20% of the amount over $100,000.
Is luxury tax still charged on boats and aircraft?
The CRA says it stopped applying to subject aircraft and vessels from 5 November 2025. Vehicles above $100,000 are still taxed unless an exemption applies.
Is GST or HST charged on luxury tax?
Yes. The CRA says GST/HST applies to the price including luxury tax.
Do I file a luxury tax return when I buy a car?
Normally the registered vendor does. Manufacturers, wholesalers, retailers and importers register, so check whether you count as an importer.
Can I claim the luxury tax as a business expense right away?
We couldn't find a rule that allows it. Treat it as part of the vehicle's cost and check the CRA's capital cost allowance rules.
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Information only. This page is general information, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns or offer tax services, and we have no connection with the CRA, Revenu Québec, any government or any company named on this page. Check the figures that matter with an official source or a qualified professional.