News and Insights

Dept of Finance: Gov't Announces 2012 Automobile Deduction Limits and Expense Benefit Rates for Business

Tax Development Dec 29, 2011

The Minister of Finance has announced the automobile expense deduction limits and the prescribed rates for automobile operating expense benefits that will apply for the 2012 taxation year. Specifically, the rates in effect will be as follows:

  • The capital cost allowance limit for passenger vehicles purchased in 2012 will remain at $30,000, plus applicable federal and provincial sales taxes. This results in a maximum allowable input tax credit of $1,500 for GST paid ($4,500, $3,900 or $3,600 for HST paid at 15%, 13% or 12% respectively) for a passenger vehicle acquired in 2012;
  • The limit on deductible leasing costs remains at $800 per month (plus applicable federal and provincial sales taxes) for leases entered into in 2012. Thus, the maximum allowable input tax credit that may be claimed for GST paid in respect of a lease entered into in 2012 is $40 per month ($120, $104 or $96 for HST at 15%, 13% or 12% respectively);
  • The limit on tax deductible, per kilometre allowances paid to employees for using their personal vehicles for business purposes increases 1 cent to 53 cents per kilometre for the first 5,000 kilometres, and 47 cents per kilometre thereafter. The rates are 4 cents per kilometre higher in the Northwest Territories, Yukon and Nunavut; and
  • The general prescribed rate used to determine the taxable benefit relating to the personal portion of automobile operating costs increases 2 cents to 26 cents per kilometre. For taxpayers employed principally in the selling or leasing of automobiles, the prescribed rate also increases 2 cents to 23 cents per kilometre.

Please note that the above limits and rates may be subject to the recapture of input tax credit requirements in British Columbia and Ontario.

The news release may be accessed at the following link:

2012 Automobile Limits