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Automobile deduction limits rates announced for 2023

Last updated: Jan. 5, 2023 

The Department of Finance Canada recently announced that automobile leasing and mileage reimbursement and Capital Cost Allowance (CCA) limits have increased, as of January 1 2023.

The changes announced are summarized as follows.

Capital Cost Allowance (CCA) for Passenger Vehicles

The before-tax CCA deduction limits for passenger vehicles (new and used) acquired on or after January 1, 2023, will be increased as follows:

  • Zero-emission passenger vehicles* (Class 54) – from $59,000 to $61,000
  • Passenger vehicles (Class 10.1) – from $34,000 to $36,000

Leasing Costs

Deductible leasing costs for new leases entered into on or after January 1, 2023 will be increased from $900 to $950 per month (before tax).

Tax-Exempt Allowances

The limit on the deduction of tax-exempt allowances paid by employers to employees who use their personal vehicle for business purposes in the provinces will increase as follows:

  • Province: from 61 cents to 68 cents per kilometre for the first 5,000 kilometres driven, and 62 cents for each additional kilometre.
  • Territories: from 65 cents to 72 cents per kilometre for the first 5,000 kilometres driven, and 66 cents for each additional kilometre.

Taxable Benefit Rates

If an employee is reimbursed for the business use of their personal vehicle, the general prescribed rate used to determine their taxable benefit will be increased from 29 cents to 33 cents per kilometre.

For those who are employed principally in selling or leasing automobiles, the rate used to determine the employee’s taxable benefit will be increased from 26 cents to 30 cents per kilometre.

Interest Deduction on Automobile Loans

For 2023, you can deduct up to $300 per month for new automobile loans, which remains unchanged from 2022.

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