Automobile deduction limits for businesses have been raised for 2022 in response to inflation, in some cases for the first time in almost 20 years.
As of Jan. 1, 2022, the deduction limits for capital cost allowances, leasing and mileage reimbursement have all increased, the Department of Finance announced Thursday.
For vehicles acquired after Jan. 1, 2022, the ceiling for capital cost allowances (CCA) for zero-emission passenger vehicles will be increased to $59,000 from $55,000. This is the first time the limit has been raised since it was introduced in the 2019 federal budget.
The CCA ceiling for passenger vehicles acquired after Jan. 1 will be increased to $34,000 from $30,000, and deductible leasing costs will be increased to $900 per month from $800 for new leases. Both figures had been fixed since at least 2003.
All CCA deductions are before sales tax.
In the provinces, the limit on the deduction of tax-exempt allowances paid to employees who use their personal vehicles for business purposes will increase by two cents to 61 cents per kilometre for the first 5,000 kilometres driven, and 55 cents for each additional kilometre. In the territories, the limit will also increase by two cents to 65 cents and 59 cents, respectively.
Those mileage rates were last raised in 2020.
The general prescribed rate used to determine the taxable benefit of employees relating to the personal portion of automobile expenses paid by their employers will be rise 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 will be increased by two cents to 26 cents per kilometre. The rate had fallen by one cent in 2021.
The maximum allowable interest deduction for new automobile loans will remain at $300 per month for 2022 as it continues to be appropriate to prevailing interest rates, the Department of Finance said in a release.
Original Article Source Credits: https://www.advisor.ca/
Article Written By: Melissa Shin
Original Article Posted on: Dec 23, 2021
Link to Original Article: https://www.advisor.ca/tax/tax-news/finance-raises-auto-deduction-rates/