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Ottawa, December 18, 2001
2001-121

2002 Automobile Deduction Limits and Expense Benefit Rates for Business

Finance Minister Paul Martin today indicated that the Government plans to maintain the automobile expense deduction limits and the prescribed rates at their current levels for 2002. Specifically:

• The ceiling on the capital cost of passenger vehicles for capital cost allowance purposes will remain at $30,000 (plus applicable federal and provincial sales taxes) for purchases after 2001.

• The limit on deductible leasing costs will remain at $800 per month (plus applicable federal and provincial sales taxes) for leases entered into after 2001. A separate restriction prorates deductible lease costs where the value of the vehicle exceeds the capital cost ceiling.

• The limit on tax-exempt allowances paid by employers to employees will remain at 41˘ per kilometre for the first 5,000 kilometres driven and 35˘ for each additional kilometre. For the Yukon Territory, Northwest Territories and Nunavut, the tax-exempt allowance will remain at 45˘ for the first 5,000 kilometres driven and 39˘ for each additional kilometre.

• The maximum allowable interest deduction for amounts borrowed to purchase an automobile will remain at $300 per month for loans related to vehicles acquired after 2001.

• The general prescribed rate used to determine the taxable benefit relating to the personal portion of automobile operating expenses paid by employers will remain at 16˘ per kilometre. For taxpayers employed principally in selling or leasing automobiles, the prescribed rate will remain at 13˘ per kilometre.

The Government reviews these rates and limits annually, and announces any planned changes prior to the end of the calendar year. This practice ensures that businesses know the new rates before the beginning of the year in which they apply.

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