The Canadian Automobile Dealers Association (CADA) has been pushing for fair tax treatment on the automobile deductions front and, in a win to dealers across the country, received some good news in December 2021 from the Department of Finance Canada.
The federal government through the Department of Finance Canada announced the automobile income tax deduction limits and expense benefit rates for 2022—noting that as of January 1, the ceiling for capital cost allowances (CCA) for zero-emission passenger vehicles increased from $55,000 to $59,000, before tax. This is in regards to vehicles both new and used acquired on or after January 1.
“Changes to the auto deductions is an indication that the federal government recognizes that vehicles are critical to the success of Canadian competitors for businesses and organizations, and that having the deduction limits raised in parallel to inflation is an important element of fairness,” said CADA Director of Public Affairs Huw Williams, in an interview with Canadian auto dealer.
The ceiling for CCA for passenger vehicles also increased on January 1—from $30,000 to $34,000, before tax, for both new and used vehicles. And deductible leasing costs jumped from $800 to $900 per month before tax, for new leases entered into.
Williams said the move by the federal government was important, particularly during the time of the pandemic when so many businesses relied on vehicles for delivery of goods and services. During this time, he said it remains important that the government understand that increases need to be made—“and it needs to increase more in the future.”
“We will be in discussions with finance officials moving forward, about appropriately raising these rates on an annual basis to match inflation,” said Williams.
More information about the announcement from the Department of Finance Canada is available here. It is also worth noting that eligible zero-emission passenger vehicles include plug-in hybrids with a battery capacity of at least 7 kWh, and also vehicles that are fully electric or completely powered by hydrogen.
