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30 December 2021

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Canada Increasing Automobile Deduction Limits and Expense Benefit Rates for 2022

Canada's Department of Finance issued a release on 23 December 2021 announcing the 2022 automobile deduction limits and expense benefit rates for businesses.

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Government announces the 2022 automobile deduction limits and expense benefit rates for businesses

News release

December 23, 2021 - Ottawa, Ontario - Department of Finance Canada

Today, the Department of Finance Canada announced the automobile income tax deduction limits and expense benefit rates that will apply in 2022.

The following changes to limits and rates will be taking effect as of January 1, 2022:

  • The ceiling for capital cost allowances (CCA) for zero-emission passenger vehicles will be increased from $55,000 to $59,000, before tax, in respect of vehicles (new and used) acquired on or after January 1, 2022.
  • The ceiling for CCA for passenger vehicles will be increased from $30,000 to $34,000, before tax, in respect of vehicles (new and used) acquired on or after January 1, 2022.
  • Deductible leasing costs will be increased from $800 to $900 per month, before tax, for new leases entered into.
  • The limit on the deduction of tax-exempt allowances paid by employers to employees who use their personal vehicle for business purposes in the provinces will increase by two cents to 61 cents per kilometre for the first 5,000 kilometres driven, and 55 cents for each additional kilometre. For the territories, the limit will also increase by two cents to 65 cents per kilometre for the first 5,000 kilometres driven, and 59 cents for each additional kilometre.
  • The general prescribed rate used to determine the taxable benefit of employees relating to the personal portion of automobile expenses paid by their employers will be increased by two cents to 29 cents per kilometre. For people who are employed principally in selling or leasing automobiles, the rate used to determine the employee’s taxable benefit will be increased by two cents to 26 cents per kilometre.

These changes reflect recent increases in the Consumer Price Index (CPI). The maximum allowable interest deduction for new automobile loans will remain at $300 per month for 2022 as it continues to be appropriate to prevailing interest rates.

Quick facts

Eligible zero-emission passenger vehicles include plug-in hybrids with a battery capacity of at least 7 kWh and vehicles that are fully electric or fully powered by hydrogen.

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