Canadian Tax Adviser
January 3, 2012

Automobile Deduction Limit Changes in 2012

Dave Armstrong
Fredericton, Canadian Corporate Tax

Dave Magdalinski
Edmonton, Canadian Corporate Tax

Finance has announced that the automobile expense deduction limits and prescribed rates for determining the taxable benefit on auto operating expenses for businesses will increase for 2012.

The limit on the deduction of tax-exempt allowances paid by employers to employees using their personal vehicle for business purposes for 2012 has 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 the Yukon, the Northwest Territories and Nunavut, the tax-exempt allowance is set 4 cents higher, and will also increase by 1 cent to 57 cents for the first 5,000 kilometres driven and to 51 cents for each additional kilometre.

In addition, 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 to 26 cents per kilometre (from 24 cents). For taxpayers employed principally in selling or leasing automobiles, the prescribed rate will increase by 2 cents to 23 cents per kilometre.

However, the ceiling on the capital cost of passenger vehicles for capital cost allowance (CCA) purposes, the limit on deductible leasing costs for leases entered into after 2011 and the maximum allowable interest deduction for amounts borrowed to purchase an automobile remain unchanged.

The limits and rates for 2012 and 2011 are as follows:

For more information, contact your KPMG adviser.

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