In a significant move that will impact businesses across the nation, the Department of Finance Canada has announced changes to the deductible mileage rates for the year 2024. Effective January 1, 2024, businesses operating in provinces will witness an increase in the limit on the deduction of tax-exempt allowances paid by employers to employees who use their personal vehicle for business purposes. The rate is set to rise by two cents, reaching 70 cents per kilometre for the first 5,000 kilometres driven, and 64 cents for each additional kilometre. Meanwhile, in the territories, the deductible mileage rates will increase by two cents to 74 cents per kilometre for the initial 5,000 kilometres and 68 cents for each subsequent kilometre.
The Department of Finance Canada has also announced the updated automobile income tax deduction limits and expense benefit rates for the year 2024. These changes, set to take effect from January 1, 2024, showcase the government’s commitment to adapt tax policies in response to economic dynamics and technological advancements within the automotive sector.
Here are the key changes you need to know as a Canadian business or driver for 2024.
Capital cost allowances (CCA) for Class 10.1 passenger vehicles
The ceiling for CCA in this category will experience an increase to $37,000 from $36,000 (before tax) for both new and used vehicles acquired on or after January 1, 2024. This adjustment reflects the government’s recognition of changing market conditions and the associated costs of acquiring and maintaining vehicles.
Deductible leasing costs
The limit on deductible leasing costs is set to rise to $1,050 from $950 per month (before tax) for new leases entered into on or after January 1, 2024. This adjustment acknowledges the evolving landscape of vehicle leasing and aims to provide businesses with increased flexibility in managing their automotive expenses.
Maximum allowable interest deduction
For new automobile loans initiated on or after January 1, 2024, businesses will benefit from an increase in the maximum allowable interest deduction to $350 from $300 per month. This change recognizes the financial implications of automotive financing and seeks to ease the burden on businesses seeking loans for their vehicle fleet.
Tax-exempt allowances for personal vehicle use
In the provinces, the limit on the deduction of tax-exempt allowances paid by employers to employees using personal vehicles for business purposes will increase to 70 cents per kilometre for the first 5,000 kilometres driven and 64 cents for each additional kilometre. In the territories, this limit will rise to 74 cents for the first 5,000 kilometres and 68 cents for each additional kilometre. These adjustments align with the government’s commitment to fair and equitable treatment across regions.
Zero-emission passenger vehicles
The CCA ceiling for Class 54 zero-emission passenger vehicles remains unchanged at $61,000 before tax for both new and used vehicles. This reaffirms the government’s continued support for environmentally friendly transportation options.
Prescribed rates for taxable employee benefits
The general prescribed rate for determining the taxable benefit of employees related to the personal portion of automobile expenses paid by their employers will remain at 33 cents per kilometre for 2024. For those employed primarily in selling or leasing automobiles, the rate remains at 30 cents per kilometre.
The 2024 automobile deduction limits and expense benefit rates set forth by the Government of Canada underscore their commitment to fostering a business-friendly environment while addressing contemporary challenges. Businesses are encouraged to assess the impact of these changes on their operations and consider adjusting their strategies accordingly. As the automotive landscape continues to evolve, staying informed about government policies and adapting to these changes will be crucial for businesses navigating the complex terrain of automobile expenses.
Government of Canada Announces 2024 Automobile Deduction Limits and Expense Benefit Rates for Businesses.” Department of Finance Canada, News release, December 18, 2023. URL: https://www.canada.ca/en/department-finance/news/2023/12/government-of-canada-announces-2024-automobile-deduction-limits-and-expense-benefit-rates-for-businesses.html.
Disclaimer: Nothing in this blog post is legal, accounting, or insurance advice. Consult your lawyer, accountant, or insurance agent, and do not rely on the information contained herein for any business or personal financial or legal decision-making. While we strive to be as reliable as possible, we are neither lawyers nor accountants or agents. For several citations of IRS publications on which we base our blog content ideas, please always consult this article: https://www.cardata.co/blog/irs-rules-for-mileage-reimbursements. For Cardata’s terms of service, go here: https://www.cardata.co/terms.