Landlord Wins Tax Deduction Battle: Tips from Leao v. QRA
Imagine managing more than a hundred rental units across dozens of buildings. Your workday is tools, parts, and tenant calls. Then your deductions are challenged and you need to prove what is business use and what is personal.
A 2024 Quebec decision offers a roadmap. The court looked at real-world facts, not perfect paperwork.
The setup
The owner was retired from other work and ran 23 rental properties with 106 units. He and his spouse shared one vehicle. No formal logbook existed. The tax authority argued only three-quarters of the driving was business. He believed the business share was far higher.
Proof that moved the court
He compiled a year’s list of 317 supplier and job-related trips with matching invoices. Total driving for the year was only about 10,000 km. Given the number of service runs, the judge inferred many additional business runs would not have invoices, leaving little distance for personal errands. Friends and family described a routine built around the buildings. Even grocery runs were timed around property maintenance. His former accountant confirmed the pattern.
The result on vehicle use
The judge fixed business use at 90 percent and allowed 90 percent of the vehicle costs.
Why the vehicle classification mattered
Photos showed the pickup crammed with tools, materials, and safety gear. A friend said it was hardly practical for extra passengers. The truck also towed a large trailer. The extended cab stored items that needed to be covered and secured. Because of how it was used and how often it was used for work, the court treated it as a work asset rather than a passenger car. That meant it belonged in class 10, so the usual passenger-vehicle limits did not apply.
Timing nuance
Vehicle classification hinges on how it is used in the year it is acquired. While the decision focused on a later year, the judge appeared to assume the same use pattern applied when the truck was first purchased.
Phone and internet splits
The owner proposed a 75 percent business split for internet and phone. The tax authority pushed for 50 percent. The court accepted 75 percent for internet because it supported rental ads and day-to-day management. For phones, the landline number was on ads and used by tenants. The mobile phone handled rental work. With no contrary proof, the judge said either of these allocations would be reasonable: 100 percent for mobile and 50 percent for landline, or 75 percent for both.
What this teaches landlords and small business owners
-Build a story that matches your workday.
-Keep supplier receipts and tie them to trips.
-If mileage logs slip, reconstruct travel with invoices and a simple route list.
-Photograph your vehicle loadout each quarter.
-Document trailer use or specialty gear if relevant.
-Pick fair, supportable percentages for internet and phones. Revisit them yearly.
Remember that how a vehicle is used can change its tax class and deduction limits.
Quick checklist to start today
-Create a one-page weekly route sheet you can reuse.
-File receipts by property or job and tag them to trips.
-Save phone bill summaries and mark business calls.
-Screenshot rental listings and tenant messages as proof of online activity.
-Take clear photos of your truck setup and trailer.
For more information – please read https://www.canlii.org/fr/qc/qccq/doc/2024/2024qccq278/2024qccq278.html
Watch full video here – https://youtu.be/tMjLvEQMQHw?si=9Arwr8zStgUPn3if
How we help
Cloudiverse CPAs sets up lean record-keeping that fits your routine and stands up during a review. We help you choose defensible percentages and keep evidence tidy.
Call to action
Need a sanity check on your vehicle, phone, and internet claims for your rentals or small business? Book a quick call with our Burnaby team.
This article is for information only. It is not tax or legal advice. Your situation may differ and results depend on specific facts and your province. Court decisions and government guidance can change. Examples are simplified and numbers are illustrative. Reading this does not create a client relationship with Cloudiverse CPAs Inc. Speak with a qualified CPA or tax lawyer before you act on anything here.