2025 Automobile Deduction Limits and Expense Benefit Rates Released

The Department of Finance Canada has announced the automobile expense deduction limits and prescribed rates for automobile operating expense benefits that apply for the 2025 taxation year. These include several changes from last year’s limits and rates.  

Effective January 1, 2025:

• The limit on tax-deductible per-kilometre allowances paid to employees for using their personal vehicles for business purposes has increased by two cents to 72 cents per kilometre for the first 5,000 kilometres, and 66 cents per kilometre thereafter. These rates are four cents per kilometre higher in the Northwest Territories, Nunavut, and Yukon.
• The capital cost allowance (CCA) limit for new and used passenger vehicles (CCA Class 10.1) purchased in 2025 has increased by $1,000 to $38,000, plus applicable federal and provincial sales taxes. However, the limit for eligible zero-emission passenger vehicles (CCA Class 54) remains at $61,000. This results in a maximum allowable input tax credit (ITC) of $1,900 for GST paid and $4,940 or $5,700 for HST paid at 13% or 15%, respectively, for a passenger vehicle (which does not qualify as a zero-emission vehicle) acquired in 2025.
• The limit on deductible automobile leasing costs has increased by $50 to $1,100 per month (plus applicable federal and provincial sales taxes) for leases entered into in 2025. Thus, the maximum ITC that may be claimed in respect of an automobile lease entered into in 2025 is $55 per month for GST paid and $143 or $165 for HST paid at 13% or 15%, respectively.
• The general prescribed rate used to determine the taxable benefit relating to the personal portion of the operating costs of an employer-provided automobile has increased by one cent to 34 cents per kilometre for 2025. For taxpayers employed principally in the selling or leasing of automobiles, the prescribed rate is now 31 cents per kilometre.

Please note that the limit for deductible automobile lease costs is determined based on the year in which a lease is entered into, rather than the year in which lease payments are made. This fact, combined with changes to the limits over the past four years, can lead to confusion when claiming ITCs for the GST/HST paid in respect of automobile leases. The deductible lease limits and maximum allowable ITCs for each year are summarized below.

The Department of Finance Canada news release may be found at: 2025 Automobile Limits

If you have any questions or concerns about the impact of the new automobile deduction limits and expense benefit rates on your organization, please contact Ryan TaxDirect® at taxdirect@ryan.com or 1.800.667.1600.