Changes to automobile income tax deduction limits a win for dealers
January 24, 2022
On December 23, 2021, the Department of Finance Canada announced changes to the automobile income tax deduction limits and expense benefit rates that will take effect as of January 2022.
One of the changes is related to the ceiling for capital cost allowances (CCA) for zero-emission passenger vehicles, which was increased from $55,000 to $59,000, before tax. This is in regards to new and used vehicles acquired on or after January 1. Similarly, the ceiling for CCA for passenger vehicles was increased from $30,000 to $34,000, before tax.
“Those numbers that they've refreshed basically make it more affordable from a tax perspective for businesses to buy or lease automobiles,” said CADA Director of Public Affairs Huw Williams, in an interview with CADA Newsline. Other changes include the deductible leasing costs, which was increased from $800 to $900 per month before tax, for new leases.
“The important point from CADA’s view is that, as inflation increases, it’s important that the government's auto deduction limits track inflation and that these numbers have been stalled for an extended period of time,” said Williams.
This, he said, reflects the government's recognition that it had to move on this file, and that CADA and its partnership with the Canadian Finance & Leasing Association has consistently made the case to increase these auto deduction limits.
Williams said vehicles remain a key component to the competitive structure of businesses both large and small, and so the auto deduction limit changes are a win for dealers.