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Business -> Automobiles, Passenger Vehicles and Motor Vehicles -> Automobile deduction limits

Passenger Vehicle Expense Limitations

Income Tax Act s. 13(7)(g), s. 67.2, s. 67.3, Income Tax Regulations R7307(1), R7307(2), R7307(3)

The Income Tax Act imposes limits on amounts than can be written off regarding passenger vehicles.  The prescribed amounts for passenger vehicles purchased or leased after 2000 (and unchanged for 2020) are:

bullet maximum deduction allowed for interest on a loan to purchase a passenger vehicle is $300 per month.
bullet maximum deduction allowed for monthly lease costs per passenger vehicle is $800 plus GST or HST and any applicable PST, less any GST or HST input tax credits claimed.  The deductible lease costs are prorated if the value of the vehicle exceeds the capital cost limit of $30,000.
bullet maximum cost amount for non zero-emission passenger vehicles for capital cost allowance (CCA) purposes is $30,000 plus taxes less input tax credits.  If you pay more than this, your CCA claim will still be based on only $30,000 plus taxes, less input tax credits.
bulletmaximum cost amount for eligible zero-emission passenger vehicles for capital cost allowance purposes is $55,000 plus taxes less input tax credits.  Eligible zero-emission passenger vehicles include plug-in hybrids with a battery capacity of at least 7 kWh and vehicles that are fully electric or fully powered by hydrogen.  See below for more information on zero-emission vehicles.

More information re CCA and vehicles:

  1. Passenger vehicles and motor vehicles are normally included in CCA class 10 (30% CCA, 15% in the first year)
  2. Passenger vehicles costing greater than $30,000 are each in a separate class 10.1 (also 30% CCA, 15% in the first year, calculated on the above cost limit).
  3. A terminal loss may not be claimed for class 10.1 vehicles.
  4. Recapture rules do not apply to class 10.1 vehicles.
  5. In the year of disposal of a class 10.1 vehicle, 15% CCA may be claimed.
  6. The $30,000 limit also applies when calculating GST input tax credits on the purchase or lease of a passenger vehicle.
  7. Zero-emission vehicles - see below.

There are also special rules set out in the Excise Tax Act, for GST registrants for claiming input tax credits on the purchase of passenger vehicles.  See:

Input tax credits on purchase of passenger vehicles and aircraft, and

Input tax credits on motor vehicle allowances.

Note that motor vehicles which are not considered passenger vehicles do not have these limitations.  See the article vehicle definitions.

Capital Cost Allowance for Zero Emission Vehicles - Federal 2019 Budget

bullet new $55,000 capital cost limit for qualifying zero-emission vehicles which would otherwise be included in class 16.  The new CCA class will be class 55, and includes taxis, vehicles acquired for the purpose of short-term renting or leasing, and heavy trucks and tractors designed for hauling freight.  The new $55,000 limit will be reviewed annually for appropriateness.
bulletthe new CCA class for previous class 10 and 10.1 zero-emission vehicles will be class 54, for which the capital cost limit is still $30,000.
bulletfull tax write-off in the year qualifying zero-emission vehicles (fully electric, a plug-in hybrid with a battery capacity of at least 15 kWh or fully powered by hydrogen) are put to use.
bulletimmediate expensing (100% enhanced allowance) will apply to eligible vehicles purchased on or after March 19, 2019 and available for use before January 1, 2024.  The enhanced allowance rate will be 75% for vehicles available for use in 2024/25, and 55% for vehicles available for use in 2026/27.  CCA will be deductible on any remaining balances in the new classes on a declining-balance basis at a rate of 30% for class 54 and 40% for class 55.
bulletVehicles for which assistance is paid under the new federal purchase incentive announced in Budget 2019 will be ineligible for the first-year immediate expensing.

TaxTips.ca Resources

All topics related to vehicles and business

Canada Revenue Agency (CRA) Resources

Line 22900 Employment Expenses - Capital Cost Allowance

     - CCA Class 10.1

T2 Schedule 8, Capital Cost Allowance

Revised: May 26, 2021

 

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