Tax questions? You ask lah! #214

Published: Wed, 04/23/25

Updated: Thu, 04/24/25

Tax questions? You ask lah!

Your weekly dose of tax knowledge - become tax savvy in just 2 minutes!

I received compensation from my car insurance policy because my personal car was damaged in a car accident. Is this compensation subject to income tax?

No, the compensation you received from your insurance policy for the damage to your personal car is a capital receipt, therefore, it is not subject to income tax.

I am a taxi driver. My car was damaged in a fire resulting a total loss, and I received compensation from my car insurance policy. Is this compensation subject to income tax?

The compensation received will be treated as proceeds for a deemed disposal. If the compensation received is more than the residual expenditure (RE) of the car, the difference will be a balancing charge and is taxable. If the compensation received is less than the RE of the car, the difference will be a balancing allowance to reduce the business income as a taxi driver.

Wishing you plentiful tax savings!

Zen Chow

YYC Tax Guru

P.S. I've received a lot of tax questions, so now I am answering the frequently asked questions and sharing them with you weekly!

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