For the 2022 year, you may be able to deduct more vehicle expenses in your business. This is not because the government wants to encourage businesses to invest in vehicles. Instead, it reflects recent increases in the Consumer Price Index (CPI). Inflation is driving up these increases, and the tax rules are allowing you to deduct more, considering you are paying more!
More Write-Offs Available for Electric Vehicles
You may be able to deduct write-off more of your electric vehicles.
The ceiling for capital cost allowances (CCA), which is the annual write-off you can claim for business-use vehicles, for zero-emission passenger vehicles (i.e., electric 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.
Note that you may be able to write off 100% of the cost of electric vehicles (up to the limit above) due to the favourable rules published in the 2019 Budget. Click here to read more.
More Write-Offs Available for Regular Vehicles
The ceiling for CCA for passenger vehicles will be increased from $30,000 to $34,000, before tax, regarding vehicles (new and used) acquired on or after January 1, 2022.
More Leasing Costs Available for Deduction
Deductible leasing costs will be increased from $800 to $900 per month, before tax, for new leases entered into.
Employers can give more per-KM vehicle allowances to employees
The CRA allows employers to pay employees a tax-free vehicle allowance. This is true as long as the allowance is solely based on kilometres and is not higher than CRA’s prescribed limits.
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.
The Operating Cost Benefit Increases by 2%
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.
Deductible Interest on Automobile Loans Staying Same
The maximum allowable interest deduction for new automobile loans will remain at $300 per month for 2022.
