2020 Automobile Deduction Limits and Rates
On December 19, 2019, the Department of Finance Canada announced the new automobile deduction limits and benefit rates for 2020. The majority of limits and rates that applied in 2019 are still in effect for 2020.
One important change to note relates to the calculation of a reasonable vehicle allowance employers can pay to their employees. For 2020, the tax-exempt allowance rises to $0.59 per kilometre for the first 5,000 kilometres, and $0.53 per kilometer for each additional kilometre.
The prescribed amounts for passenger vehicles that remained the same are the following:
- For purchases of passenger vehicles after 2019, the maximum capital cost amount allowed remains at $30,000 (plus applicable taxes less any GST or HST input tax credits claimed). For zero-emission vehicles, the maximum capital cost amount is $55,000 (plus applicable taxes less any GST or HST input tax credits claimed). Automobiles need to meet certain criteria to be considered zero-emission.
- The maximum deduction allowed for monthly lease costs per passenger vehicle remains at $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.
- The maximum amount of deductible interest incurred relating to purchasing an automobile also remains at $300 per month for financing beginning after 2019.
- The prescribed rate for calculating taxable benefits for employees for personal usage of company vehicles remains at $0.28 per kilometre.
Be sure to contact Ritchie Shortt & Tully LLP if you have any questions!