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Ottawa, December 17, 2004
2004-081
2005 Automobile Deduction Limits and Expense Benefit Rates
for Business
Minister of Finance Ralph Goodale announced today the automobile expense
deduction limits and the prescribed rates for the automobile operating
expense benefit that will apply in 2005. Specifically:
- The ceiling on the capital cost of passenger vehicles for capital cost
allowance (CCA) purposes will remain at $30,000 (plus applicable federal
and provincial sales taxes) for purchases after 2004. This ceiling
restricts the cost of a vehicle on which CCA may be claimed for business
purposes.
- The limit on deductible leasing costs will remain at $800 per month
(plus applicable federal and provincial sales taxes) for leases entered
into after 2004. This limit, which ensures that the level of deductions
for leased and purchased vehicles is consistent, is one of two
restrictions on the deduction of automobile lease payments.
A separate restriction prorates deductible lease costs where the
value of the vehicle exceeds the capital cost ceiling.
- 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 2004. This limit reflects the reasonable cost
of financing a vehicle for business purposes.
- The limit on the deduction of tax-exempt allowances paid by employers
to employees using their personal vehicle for business purposes will
increase by 3 cents to 45 cents per kilometre for the first 5,000
kilometres driven and 39 cents for each additional kilometre. For the
Yukon Territory, Northwest Territories and Nunavut, the tax-exempt
allowance will rise by 3 cents to 49 cents for the first
5,000 kilometres driven and 43 cents for each additional kilometre.
The allowance amounts reflect the key cost components of owning and
operating an automobile, such as depreciation, financing, insurance,
maintenance and fuel costs.
- The general prescribed rate used to determine the taxable benefit
relating to the personal portion of automobile operating expenses paid
by employers will increase by 3 cents to 20 cents per kilometre. For
taxpayers employed principally in selling or leasing automobiles, the
prescribed rate will be increased by 3 cents to 17 cents
per kilometre. The amount of the benefit reflects the costs of
operating an automobile. The additional benefit of having an
employer-provided vehicle available for personal use (i.e., the
automobile standby charge) is calculated separately and is also included
in the employee’s income.
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 are aware of the new rates before the beginning of the year
in which they apply.
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For further information:
David Gamble
Public Affairs and
Operations Division
(613) 996-8080 |
Pat Breton
Press Secretary
Office of the Minister of Finance
(613) 996-7861 |
If you would like to receive automatic e-mail notification of all news
releases, please visit the Department of Finance Canada Web site at
http://www.fin.gc.ca/scripts/register_e.asp.
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