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Passenger Vehicle Expense Limitations

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Business -> Automobiles, Passenger Vehicles and Motor Vehicles -> Automobile deduction limits

Passenger Vehicle Expense Limitations

Income Tax Act s. 13(7)(g), s. 67.2, s. 67.3, Income Tax Regulations R7307(1), R7307(2), R7307(3)

The Income Tax Act imposes limits on amounts than can be written off regarding passenger vehicles.  The prescribed amounts for passenger vehicles purchased or leased after 2000 (and unchanged for 2017) are:

bullet maximum deduction allowed for interest on a loan to purchase a passenger vehicle is $300 per month.
bullet maximum deduction allowed for monthly lease costs per passenger vehicle is $800 plus GST or HST and any applicable PST, less any GST or HST input tax credits claimed.  The deductible lease costs are prorated if the value of the vehicle exceeds the capital cost limit of $30,000.
bullet maximum cost amount for capital cost allowance (CCA) purposes is $30,000 plus taxes less input tax credits.  If you pay more than this, your CCA claim will still be based on only $30,000 plus taxes, less input tax credits.

More information re CCA and vehicles:

  1. Passenger vehicles are normally included in CCA class 10 (30% CCA, 15% in the first year)
  2. Passenger vehicles costing greater than $30,000 are each in a separate class 10.1 (also 30% CCA, 15% in the first year, calculated on the above cost limit).
  3. A terminal loss may not be claimed for class 10.1 vehicles.
  4. Recapture rules do not apply to class 10.1 vehicles.
  5. In the year of disposal of a class 10.1 vehicle, 15% CCA may be claimed.
  6. The $30,000 limit also applies when calculating GST input tax credits on the purchase or lease of a passenger vehicle.

There are also special rules set out in the Excise Tax Act, for GST registrants for claiming input tax credits on the purchase of passenger vehicles.  See Input tax credits on purchase of passenger vehicles and aircraft, and Input tax credits on motor vehicle allowances.

Note that motor vehicles which are not considered passenger vehicles do not have these limitations.  See the article on vehicle definitions.

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Revised: September 19, 2017

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