Can you write off a Mercedes G-Wagon in Canada?

If you’ve ever scrolled social media and seen American influencers or entrepreneurs claiming they “wrote off” a Mercedes G-Wagon as a business expense, you might wonder if that’s something you can do here in Canada.

In this post, we dive into whether you can write off a G Wagon or any other luxury car for that matter in Canada.

Why are the write off rules in Canada different than the USA?

In the United States, tax code Section 179 and Bonus Depreciation provisions allow business owners to deduct up to 100% of a qualifying vehicle’s purchase price (if it’s over 6,000 pounds) in the first year. The G-Wagon qualifies, so American business owners can deduct the entire $200,000 purchase all at once.

In Canada, no such provision exists. Instead:

• Capital assets like vehicles are depreciated gradually under the Capital Cost Allowance (CCA) rules. If you’d like to learn more about CCA, you can read our blog post here.
• Most vehicles which for tax purposes are considered to be passenger vehicles are subject to a capital cost limit of $37,000 (2025 limit), plus applicable taxes.
• That means only the first $37,000 of the vehicle’s cost is eligible to be depreciated for tax purposes, no matter how much the vehicle actually costs.
• The rest of the cost i.e. anything above $$37,000 is not deductible.

How do vehicle write offs work in Canada?

Here’s how the G-Wagon would be treated in a typical business purchase:

Classification Matters

For tax purposes, CRA classifies vehicles as either:

You can review the full list of the CRA’s vehicle definitions here or in the chart at the end of this post. 

Most G-Wagons will be classified as passenger vehicles. Unless you’re using the SUV as a delivery truck or transporting tools and inventory regularly, it’s unlikely the CRA would view it as a motor vehicle.

Capital Cost Allowance (CCA) Deduction

If you purchase the G-Wagon for $200,000 and it is classified as a passenger vehicle, 

• • Only $37,000 (plus tax) can be added to the CCA schedule.
  • The vehicle would fall under Class 10.1 (30% depreciation rate).
  • In year one, due to the half-year rule, you can only claim 15% of the capital cost.

Example:

• • Eligible capital cost = $37,000
  • Year 1 CCA = $37,000 × (30% x 50%) = $5,550

In future years, you can claim 30% of the declining balance, but you’ll never be able to deduct more than the $37,000 limit. The remaining amount is not deductible at all.

What About Leasing a G-Wagon?

Leasing may seem like a workaround, but CRA also imposes limits on lease deductions:

• • The maximum monthly lease expense deductible is $950 (plus tax) per month in 2025. If your monthly lease payment is more than this amount, you will not be able to deduct the excess.  

Also note:

• • Any upfront lease payments must be prorated over the lease term.
  • Business use must be clearly documented via a mileage log tracking business and personal kilometers driven 

Are There Any Acceptable Scenarios for Deducting a G-Wagon?

While rare, there are a few cases where some or all of the cost could be deductible:

A. If the Vehicle Qualifies as a Motor Vehicle (Not Passenger)

In very limited situations, a G-Wagon used to used to transport goods, equipment, or passengers and provided the vehicle is used 90% for business (via a mileage log), can be written off.

B. Used in a Brand-Driven Business

Luxury branding businesses like real estate, personal branding, or concierge services might argue that the G-Wagon is integral to brand positioning. Even then, CRA will question whether that justifies an expense for a vehicle worth more than $200K.

Detailed Calculation Example

Let’s say you’re buying a 2025 Mercedes G-Wagon G550 in Ontario:

• • Purchase price: $200,000
  • HST (13%): $26,000
  • Total: $226,000

Assume the vehicle is used 90% for business.

So even over several years, your total tax benefit is small relative to the cost.

Risks and Negative Consequences

Trying to fully deduct a G-Wagon without properly applying the CRA rules can lead to:

• • Audits and reassessments

• • Denial of deductions and additional taxes owing

• • Penalties and interest charges

• • Reputational risk, especially for incorporated professionals (doctors, dentists, consultants)

The CRA knows that luxury vehicles are high-risk audit triggers, especially when owned by small corporations.

Owing a vehicle through a corporation can be very tax inefficient

Let’s say your corporation buys a G-Wagon for $226,000 (including HST in Ontario):

Tax Treatment:

• • Only $37,000 + tax is eligible for CCA (Class 10.1, 30% rate).
  • Year 1 CCA = $5,550
  • Future years: 30% declining balance on $37,000

Result:

• • You spent $226K+ and only get to deduct $5,550 in year one and a fraction of that each year after.
  • You will never recover the full $226,000 you spent on the car.

The Solution: Own the G-Wagon Personally, Deduct Corporate Mileage 

Here’s the more efficient (and audit-resistant) way to deduct business-related vehicle use in Canada especially if you don’t use the vehicle for business for more than 90% of the kilometers driven in a year.

1.Buy or lease the G-Wagon personally.

• • You bear the cost and retain flexibility in use 
  • No CRA caps apply since you’re not claiming CCA or leasing costs

2. Track all business-related kilometers driven.

• • Keep a CRA-compliant mileage log:
    • • Date
      • Start & end locations
      • Purpose of trip
      • KM driven

3. Bill your corporation a tax-free mileage allowance.

• • CRA allows $0.70/km for the first 5,000 km, and $0.64/km after that (2025 rates).

These amounts are:

• • Non-taxable to you personally.
  • Fully deductible to the corporation.

Example: Mileage Reimbursement Strategy

Let’s say you personally own a G-Wagon, and in 2025, you drive:

• • 8,000 km for business
  • 12,000 km for personal

You submit a mileage log to your corporation, which reimburses you:

• • First 5,000 km × $0.70 = $3,500
  • Remaining 3,000 km × $0.64 = $1,920

Total tax-free reimbursement: $5,420

• • You receive this personally tax-free.
  • The corporation deducts $5,420 as a business expense.
  • You don’t need to deal with CCA, lease limits, or vehicle classification rules.

This is the cleanest and most defensible method to write off a G-Wagon (or any vehicle) in Canada.

Do you have questions about writing off a new vehicle? Let us help you. Get in touch with us here or sign up to get more accounting and tax tips in our newsletter here.

The accounting and tax information provided in this post does not constitute advice and is meant to be for general information purposes only. The information is current as at the date of this post and does not reflect any changes in accounting and/or tax legislation thereafter. Moreover, the information has been prepared without considering your company or personal financial/tax circumstances and/or objectives.