The Department of Finance announced the automobile expense deduction limits and the prescribed rates for automobile operating expense benefits that will apply for the 2020 taxation year. This year’s announcement contains only one rate change from the prior year. Effective January 1, 2020, the rates will be as follows:
- The limit on tax-deductible per kilometre allowances paid to employees for using their personal vehicles for business purposes increases by one cent to 59 cents per kilometre for the first 5,000 kilometres, and to 53 cents per kilometre thereafter. The rates are four cents per kilometre higher in the Northwest Territories, Nunavut, and Yukon;
- The general prescribed rate used to determine the taxable benefit relating to the personal portion of automobile operating costs will remain at 28 cents per kilometre. For taxpayers employed principally in the selling or leasing of automobiles, the prescribed rate will also remain at 25 cents per kilometre;
- The capital cost allowance limit for passenger vehicles purchased in 2020 will remain at $30,000, plus applicable federal and provincial sales taxes, and $55,000 for eligible zero-emission passenger vehicles. This results in a maximum allowable input tax credit of $1,500 for GST paid ($3,900 or $4,500 for HST paid at 13% or 15% respectively) for a passenger vehicle acquired in 2020 which is not a zero-emission passenger vehicle; and
- The limit on deductible leasing costs remains at $800 per month (plus applicable federal and provincial sales taxes) for leases entered into in 2020. Thus, the maximum allowable input tax credit that may be claimed for GST paid in respect of a lease entered into in 2020 is $40 per month for GST paid ($104 or $120 for HST at 13% or 15% respectively). It should be noted that where the leased vehicles value exceeds the $30,000 capital cost limit, an additional restriction will further prorate the deductible amount of the lease costs.
Please note that the above limits and rates may be subject to the recapture of input tax credit requirements in Prince Edward Island.
The news release may be accessed at the following link: 2020 Automobile Limits