News and Insights

Dept of Finance: Gov't Announces 2016 Automobile Deduction Limits and Expense Benefit Rates for Business 

Tax Development Dec 24, 2015

The Finance Minister has announced the automobile expense deduction limits and the prescribed rates for automobile operating expense benefits that will apply for the 2016 taxation year. This year’s announcement is different from those made in previous years, as two of the rates have declined from the previous year. Specifically, the rates in effect as of January 1, 2016 will be as follows:

  • The limit on tax deductible per kilometre allowances paid to employees for using their personal vehicles for business purposes decreases by 1 cent to 54 cents per kilometre for the first 5,000 kilometres, and to 48 cents per kilometre thereafter. The rates are 4 cents per kilometre higher in the Northwest Territories, Yukon and Nunavut;
  • The capital cost allowance limit for passenger vehicles purchased in 2016 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, $4,200 or $3,900 for HST paid at 15%, 14% or 13% respectively) for a passenger vehicle acquired in 2016;
  • The limit on deductible leasing costs remains at $800 per month (plus applicable federal and provincial sales taxes) for leases entered into in 2016.  Thus, the maximum allowable input tax credit that may be claimed for GST paid in respect of a lease entered into in 2016 is $40 per month ($120, $112 or $104 for HST at 15%, 14%, or 13% respectively); and
  • The general prescribed rate used to determine the taxable benefit relating to the personal portion of automobile operating costs decreases by 1 cent to 26 cents per kilometre.  For taxpayers employed principally in the selling or leasing of automobiles, the prescribed rate will also decrease by 1 cent 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 Ontario and Prince Edward Island.

The news release may be accessed at the following link:.

2016 Automobile Limits