Tax Update: 2022 Automobile Deduction Limits and Expense Benefit Rates for Business Announced

The Department of Finance recently announced the 2022 automobile expense deduction limits and prescribed rates for automobile operating expense benefits. This year’s announcement contains several rate changes to reflect recent increases in the Consumer Price Index.

Of particular note are increases to the ceiling for capital cost allowance (CCA) for certain passenger vehicles and deductible leasing costs, which were last changed in 2001.

The following changes to limits and rates are effective as of January 1, 2022:

• The ceiling for CCA for zero-emission passenger vehicles* is increased from $55,000 to $59,000, before tax, in respect of vehicles (new and used) acquired on or after January 1, 2022.
• The ceiling for CCA for passenger vehicles is increased from $30,000 to $34,000, before tax, in respect of vehicles (new and used) acquired on or after January 1, 2022.
• Deductible leasing costs are increased from $800 to $900 per month, before tax, for new leases entered into.
• The limit on the deduction of tax-exempt allowances paid by employers to employees who use their personal vehicle for business purposes are increased as follows:
  • Provinces: by two cents to 61 cents per kilometre for the first 5,000 kilometres driven, and 55 cents for each additional kilometre.
  • Territories: by two cents to 65 cents per kilometre for the first 5,000 kilometres driven, and 59 cents for each additional kilometre.
• The general prescribed rate used to determine the taxable benefit of employees relating to the personal portion of automobile expenses paid by their employers is increased by two cents to 29 cents per kilometre. For people who are employed principally in selling or leasing automobiles, the rate used to determine the employee’s taxable benefit is increased by two cents to 26 cents per kilometre.
• The maximum allowable interest deduction for new automobile loans remains at $300 per month for 2022.

*Eligible zero-emission passenger vehicles include plug-in hybrids with a battery capacity of at least 7 kWh and vehicles that are fully electric or fully powered by hydrogen.

For more information, contact your local MNP Advisor.