The Department of Finance Canada has announced the automobile expense deduction limits and prescribed rates for automobile operating expense benefits that will apply for the 2023 taxation year. This year’s announcement contains several changes from last year.
The new rates, effective January 1, 2023, will be as follows:
- The limit on tax-deductible per kilometre allowances paid to employees for using their personal vehicles for business purposes increases by seven cents to 68 cents per kilometre for the first 5,000 kilometres and 62 cents per kilometre thereafter. The rates are four cents per kilometre higher in the Northwest Territories, Nunavut, and Yukon.
- The capital cost allowance limit for passenger vehicles purchased in 2023 will increase by $2,000 to $36,000, plus applicable federal and provincial sales taxes, and $61,000 for eligible zero-emission passenger vehicles. This results in a maximum allowable input tax credit (ITC) of $1,800 for GST paid and $4,680 or $5,400 for HST paid at 13% or 15%, respectively, for a passenger vehicle acquired in 2023 that is not a zero-emission passenger vehicle.
- The limit on deductible leasing costs will increase by $50 to $950 per month (plus applicable federal and provincial sales taxes) for leases entered in 2023. Thus, the maximum allowable ITC that may be claimed for GST paid in respect of an automobile lease entered in 2023 is $47.50 per month for GST paid ($123.50 or $142.50 for HST at 13% or 15%, respectively).
- The general prescribed rate used to determine the taxable benefit related to the personal portion of the operating costs of an employer-provided automobile will increase by four cents to 33 cents per kilometre. For taxpayers employed principally in the selling or leasing of automobiles, the prescribed rate will rise to 30 cents per kilometre.
Please note it is the year in which a lease is entered, and not the year in which the lease payments are made that determines the lease limit. The allowable lease limit is $800 for a lease entered into before January 1, 2022 and $900 for a lease entered in 2022. These limits are summarized in the chart below.
|
Year Vehicle Leased |
Maximum Deductible Lease Cost ($) |
Maximum GST ITC Claim ($) |
Maximum 13% HST ITC Claim ($) |
Maximum 15% HST ITC Claim ($) |
|
2023 |
950 |
47.50 |
123.50 |
142.50 |
|
2022 |
900 |
45.00 |
117.00 |
135.00 |
|
2021 or earlier |
800 |
40.00 |
104.00 |
120.00 |
The news release may be accessed at the following link: 2023 Automobile Limits
- Topics
- Income Tax
- Sales Tax
- Transportation
- Federal