On December 30, 2013, the Canadian Minister of Finance announced that the automobile expense deduction limits and prescribed rates for the automobile operating expense benefit will remain unchanged for 2014.
This announcement means that, in regards to the capital cost allowance that may be claimed on a company vehicle, the current $30,000 ceiling (plus applicable fees and taxes) will be upheld. Further, an employee or business owner will still only be able to deduct a maximum of $300 when it comes to the interest associated with their payments on a company car acquired before 2013.
When it comes to vehicle leases acquired after 2013, the limit on deductible leasing costs will remain at $800 per month. This $800 limit is one of two restrictions on automobile lease payment dedications. A second restriction will apply to the deductible leases costs when the value of the leased vehicle exceeds the capital cost ceiling discussed at the beginning of this blog.
In regards to employees who leverage their personal vehicle for business purposes, the limit for tax-exempt deductions paid to them by an employer will also remain unchanged. Employees will still be able to deduct 54 cents per kilometre for the first 5,00 kilometres driven. After that, the employee may deduct 48 cents for each additional kilometre travelled.
The rate of the taxable benefit concerning the personal use of a vehicle paid by an employer remains at 27 cents per kilometre. Those taxpayers who sell or lease vehicles must adhere to a rate of 24 cents per kilometre. These benefit limits have been established with the consideration of the costs of operating a vehicle in Ontario. Employees who benefit from using an employer-provided vehicle for personal use must know that this additional benefit is calculated separately. Further, the benefit of using an employer-provided car will be included as a part of the employee’s earnings.
The government reviews and decides whether or not to make changes to these deduction limits annually. Taxpayers must ensure that they remain informed regarding such changes, as they may directly affect their deductions, compromising the validity of an individual’s tax return.
If you need more information regarding these limitations visit http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/229/slry/mtrvhcl-eng.html . Alternatively, contact Hogg, Shain & Scheck for an accounting consultation. During a consultation, our accounting team will inform you regarding your entitlements and limitations to ensure that you file a flawless tax return.
Our accounting firm understands that tax time is stressful for business owners and employees. However, dealing with taxes shouldn’t be taxing. We recommend planning ahead and leveraging the knowledge of seasoned professionals, rather than trying to go it alone. Our accountants will minimize your costs and maximize the number of money-saving opportunities that you are able to take advantage of. If you live in the Greater Toronto area, we would love to help you experience a stress-free tax season. Don’t become overwhelmed by technicalities and limits. Instead, give us a call and relax knowing that your finances are in extremely capable hands.