2023 Automobile Deduction Limits and Expense Benefit Rates for Businesses

On December 16, 2022, The Department of Finance Canada announced the automobile income tax deduction limits and expense benefit rates that will apply in 2023.

The following changes to limits and rates will take effect as of January 1, 2023:

• The ceiling for capital cost allowances (CCA) for Class 10.1 passenger vehicles will be increased from $34,000 to $36,000, before tax, in respect of vehicles (new and used) acquired on or after January 1, 2023.
• The ceiling for CCA for Class 54 zero-emission passenger vehicles will be increased from $59,000 to $61,000, before tax, in respect of vehicles (new and used) acquired on or after January 1, 2023.
• Deductible leasing costs will be increased from $900 to $950 per month, before tax, for new leases entered into on or after January 1, 2023.
• 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 seven cents to 68 cents per kilometre for the first 5,000 kilometres driven, and to 62 cents for each additional kilometre. For the territories, the limit will also increase by seven cents to 72 cents per kilometre for the first 5,000 kilometres driven, and to 66 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 four cents to 33 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 four cents to 30 cents per kilometre.
• The maximum allowable interest deduction for new automobile loans of $300 per month will remain the same for 2023.