Canada announced restrictions on car deductions in 2019

Canada announced restrictions on car deductions in 2019, Vladimir Volenyuk

Many companies encourage their employees to use personal vehicles for work and offer certain incentives for that. Those incentives partially cover the operating cost and the long-term cost or using the vehicle for work. Many people just lease their vehicles, counting that will be cheaper over the long period of time. The limit on deductions for non-taxable allowances paid by employers to employees who use their personal cars for business purposes in 2019 will be increased by 3 cents to 58 cents per km for the first 5,000 kilometers traveled and to 52 cents for each additional kilometer.

In the Northwest Territories, Nunavut and Yukon, the non-taxable surcharge will be 4 cents higher and increase to 62 cents per kilometer for the first 5,000 kilometers and 56 cents for each additional kilometer. These benefits are intended to reflect the basic costs of owning and operating a vehicle, such as depreciation, financing, insurance, maintenance, and fuel.

The amount of this rate is intended to reflect the cost of operating the vehicle.

The additional benefit of having a vehicle available for personal use provided by the employer is calculated separately on the basis of capital costs and is also included in the employee’s income.

The following restrictions from 2018 will remain active for 2019:

The maximum level of capital expenditure on passenger vehicles (CCA) will remain at $30,000 (plus applicable federal and provincial-territorial sales taxes) for purchases after 2018. This rate limits the cost of the vehicle for which the CCA can be established and which is declared for commercial use.

The maximum allowable percentage deduction for the amounts borrowed to buy a car will remain at $300 per month for loans related to vehicles purchased after 2018.

The limit on deductible leasing costs will remain at $800 per month (plus applicable federal and provincial-territorial sales taxes) for lease agreements concluded after 2018. This limit is one of two restrictions on deducting car rental fees. A separate limitation determines the deductible rental costs if the value of the vehicle exceeds the capital expenditure ceiling.

In Canada people who have a vehicle, mostly use it for a personal commute, getting to and from work, but those who agree to use personal vehicle for work needs will receive an incentive for that. Employers can request that when hiring employees, it can be a part of a job requirement or an option, which will have an additional fund to be paid to the employee to help with a cost of operating a vehicle with kilometers added when used for work. In the long run, such vehicles will require more funds and time for routine maintenance, like oil change, new tires and brake system maintenance. Engine work and a fuel system fix will be required more often, than those cars used for personal use only with fewer kilometers added daily.

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