2017 Income Tax Limits and Benefit Rates for Automobile Expenses

2017 income tax deduction limits and benefit rates when using an automobile for business purposes.

The ceiling on the capital cost of passenger vehicles for capital cost allowance (CCA) purposes remains at $30,000 (plus applicable federal and provincial sales taxes) for purchases after 2016. This ceiling restricts the cost of a vehicle on which CCA may be claimed for business purposes.

• The maximum allowable interest deduction for amounts borrowed to purchase an automobile remains at $300 per month for loans related to vehicles acquired after 2016.
• The limit on deductible leasing costs remains at $800 per month (plus applicable federal and provincial sales taxes) for leases entered into after 2016. This limit is one of two restrictions on the deduction of automobile lease payments. A separate restriction prorates deductible lease costs where the value of the vehicle exceeds the capital cost ceiling.
• The limit on the deduction of tax-exempt allowances paid by employers to employees using their personal vehicle for business purposes for 2017 remains at 54 cents per kilometre for the first 5,000 kilometres driven and 48 cents for each additional kilometre. For Yukon, the Northwest Territories and Nunavut, the tax-exempt allowance remains at 58 cents for the first 5,000 kilometres driven and 52 cents for each additional kilometre. The allowance amounts reflect the main costs of owning and operating an automobile, such as depreciation, financing, insurance, maintenance and fuel.
• The general prescribed rate used to determine the taxable benefit relating to the personal portion of automobile operating expenses paid by employers for 2017 is reduced by 1 cent to 25 cents per kilometre. For taxpayers employed principally in selling or leasing automobiles, the prescribed rate is reduced by 1 cent to 22 cents per kilometre. The amount of the benefit reflects the costs of operating an automobile. The additional benefit of having an employer-provided vehicle available for personal use (i.e., the automobile standby charge) is calculated separately and is also included in the employee’s income.

About the Author:

Ofer Tamir, CPA, CA, is a Tax Manager at Crowe BGK.

Connect with him: [email protected]