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Automobile Expense Tax Deducations

Car Expenses and Deduction Limits for 2016

The amounts that can be claimed or deducted in respect of automobile expenses changes every year, so the rules for Canadian tax planning for automobile expenses have to be updated annually. Here are the amounts applicable for 2016. Our Toronto tax lawyers can assist you with your car or other tax planning needs.

The limit on income tax exempt car allowances paid by Canadian employers to their employees will go down to $0.54 per km from $0.55 per km for the first 5,000 km driven and $0.48 from $0.49 for each additional km. With the fall in the price of gasoline this was expected.

The general rate prescribed to determine the taxable benefit relating to the personal portion of car operating expenses paid by employers for their employees will go down to $0.26 per km from $0.27 per km. For taxpayers who are employed principally in selling or leasing automobiles, the prescribed rate is now $0.23 per km.

The maximum that can be claimed for the capital cost of cars for tax depreciation (capital cost allowance or CCA) purposes will not change from $30,000 (plus applicable federal and provincial sales taxes) for purchases after 2015.

Lease amounts are also unchanged. For a lease instead of a purchase the maximum amount of deductible leasing costs will remain at $800 per month (plus applicable federal and provincial sales taxes) for leases entered into after 2015. Remember that this limit is one of two restrictions on the deduction of automobile lease payments. A separate restriction pro rates the deductible lease costs where the value of the vehicle exceeds the $30,000 capital cost ceiling.

If financing your car purchase, the maximum allowable deduction for interest on amounts borrowed to purchase a car will remain unchanged at $300 per month for financing related to vehicles acquired after 2015.

Disclaimer:

"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."

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