The Department of Finance announced the automobile expense deduction limits and the prescribed rates for automobile operating expense benefits that will apply for the 2022 taxation year. This year’s announcement includes several important changes from the prior year. Effective January 1, 2022, the prescribed rates will be as follows:
- The limit on tax-deductible per kilometre allowances paid to employees for using their personal vehicles for business purposes will increase by two cents to 61 cents per kilometre for the first 5,000 kilometres, and to 55 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 increase by two cents to 29 cents per kilometre. For taxpayers employed principally in the selling or leasing of automobiles, the prescribed rate will also increase by two cents to 26 cents per kilometre.
- The capital cost allowance limit for passenger vehicles purchased in 2022 will increase by $4,000 to $34,000 (plus applicable federal and provincial sales taxes) and $59,000 for eligible zero-emission passenger vehicles. This results in a maximum allowable input tax credit of $1,700 for GST paid (and $4,420 or $5,100 for HST paid at 13% or 15%, respectively) on a passenger vehicle acquired in 2022 that is not a zero-emission passenger vehicle.
- The limit on deductible leasing costs will also increase by $100 to $900 per month (plus applicable federal and provincial sales taxes) for leases entered into in 2022. Thus, the maximum allowable input tax credit that may be claimed for GST paid in respect of a lease entered into in 2022 is now $45 per month (and $117 or $135 per month for HST paid at 13% or 15%, respectively).
Please note that it is the year in which a lease is entered into, and not the year in which lease payments are made, that determines the applicable lease limit. For example, the deductible lease limit for an automobile lease entered into before January 1, 2022 will remain at $800, and the corresponding maximum allowable input tax credit would be $40 for GST paid and $104 or $120 for HST paid at 13% or 15%, respectively, throughout the term of the lease.
The news release may be accessed at the following link: Government announces the 2022 automobile deduction limits and expense benefit rates for businesses