For 2024, the Department of Finance Canada made some notable changes to the automobile income tax deduction limits and mileage rates, with the initial mileage rate increasing to 70 cents per kilometre for the first 5,000 kilometers driven. Here’s a complete look at how these changes will impact you.
What are the automobile deduction rates for 2024?
The Canadian government made changes to increase the deduction limit and mileage rate. To understand how this will affect you, take a look at the announcements from the DFC:
- In provinces, the limit on the deduction of tax-exempt allowances paid by employers to employees who use their personal vehicle for business purposes will increase by two cents, to 70 cents per kilometre, for the first 5,000 kilometres driven, and to 64 cents for each additional kilometre.
- For the territories, the limit will also increase by two cents, to 74 cents per kilometre, for the first 5,000 kilometres driven, and to 68 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 remain at 33 cents per kilometre for 2024. For people who are employed principally in selling or leasing automobiles, the rate used to determine the employee’s taxable benefit will remain the same, at 30 cents per kilometre for 2024.
- The ceiling for capital cost allowances (CCA) for Class 10.1 passenger vehicles will increase to $37,000 from $36,000, before tax, in respect of new and used vehicles acquired on or after January 1, 2024.
- The limit on deductible leasing costs will be increased to $1,050 from $950 per month, before tax, for new leases entered into on or after January 1, 2024.
- The maximum allowable interest deduction will be increased to $350 from $300 per month for new automobile loans entered into on or after January 1, 2024.
- The CCA ceiling for Class 54 zero-emission passenger vehicles ($61,000 before tax for new and used vehicles) will remain the same for 2024, as this limit continues to be appropriate.
What vehicle expenses are tax deductible in Canada?
You are eligible to claim many types of vehicle expenses on your taxes. The types of expenses you can claim on “Line 9281 — Motor Vehicle Expenses (not including CCA)” of Form T2125 or Form T2121, or line 9819 of Form T2042 include:
- License and registration fees
- Auto insurance
- Fuel and oil costs
- Interest on money borrowed to buy a motor vehicle
- Maintenance and repairs
- Leasing payments
In addition to the above expenses, you may also claim Capital Cost Allowance (CCA), which entails the business assets that have value, yet depreciate over time. To learn more about the CRA tax return, visit our blog to find useful resources and information on how to file self-employment taxes.