Canadian automobile deduction limits unchanged for 2012

January 04, 2012

The Honourable Jim Flaherty, Minister of Finance, announced on December 29, 2011 the automobile expense deduction limits and the prescribed rates for the automobile operating expense benefit that will apply in 2012. Of note:

• The ceiling on the capital cost of passenger vehicles for capital cost allowance purposes will remain at $30,000 (plus applicable federal and provincial sales taxes) for purchases after 2011.
• The limit on deductible leasing costs will remain at $800 per month (plus applicable federal and provincial sales taxes) for leases entered into after 2011.
• The maximum allowable interest deduction for amounts borrowed to purchase an automobile will remain at $300 per month for loans related to vehicles acquired after 2011.
• The limit on the deduction of tax-exempt allowances paid by employers to employees using their personal vehicle for business purposes for 2012 will be increased by 1 cent to 53 cents per kilometre for the first 5,000 kilometres driven and to 47 cents for each additional kilometre. For Yukon, the Northwest Territories and Nunavut, the tax-exempt allowance will increase by 1 cent to 57 cents for the first 5,000 kilometres driven and to 51 cents for each additional kilometre.
• The general prescribed rate used to determine the taxable benefit relating to the personal portion of automobile operating expenses paid by employers for 2012 will increase by 2 cents to 26 cents per kilometre. For taxpayers employed principally in selling or leasing automobiles, the prescribed rate will increase by 2 cents to 23 cents per kilometre.

The Government reviews these rates and limits annually, and announces any planned changes prior to the end of the calendar year. This practice ensures that businesses are aware of the new rates before the beginning of the year in which they apply.

You can read the Minister’s complete announcement here.

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