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Accountant for Physicians in canada

2023 Automobile Deductions Limits & Expense Benefit Rates

Accountant for Physicians in canada

1. AUTOMOBILE RATES

On December 16, 2022, the Department of Finance announced the automobile expense deduction limits and prescribed rates on automobile operating expense benefits for the 2023 calendar year. These limits and rates will be in effect from January 1, 2023 to December 31, 2023.

a. Max. capital cost of passenger vehicles for CCA purposes (before HST):

$61,000 for eligible zero-emission passenger vehicles (2022: $59,000)

$36,000 for all other passenger vehicles (2022: $34,000)

b. Max. allowable interest deduction for amounts borrowed to purchase autos: $300 per month (2022: same)

c. Limit on deductible leasing costs (before HST): $950 per month (2022: $900 per month)

d. Limit on deduction of tax-exempt allowances paid by employers to employees using personal vehicle for business purposes in the provinces:

68 cents per km on the first 5,000 km driven (2022: 61 cents per km)

62 cents per km on each additional km driven (2022: 55 cents per km)

e. Standby operating expense income inclusion:

33 cents per km for persons subject to general rate (2022: 29 cents per km)

30 cents per km for persons principally employed in selling autos (2022: 26 cents per km)

2. REIMBURSING PERSONAL OPERATING COSTS

If a corporate client provides an employee with a company car, a taxable benefit is generally included on the employee’s T4. There are two components to this benefit:

Standby charge benefit: Based on a percentage of original cost or monthly lease payments.

Operating cost benefit: Applies if the client pays for automobile’s operating expenses, unless the employee reimburses all amounts paid for personal expenses. For operating costs incurred in 2022, the reimbursement deadline is February 14, 2023. 

3. PERSONAL VS. BUSINESS USE

“Personal driving” is any driving by an employee (or a person related to the employee) for purposes unrelated to employment. CRA considers the following as personal:

• Travel between the employee’s home and the regular place of work, and vice versa

• Vacation trips, as well as driving to conduct personal activities

CRA considers the following as business:

• At start of workday, travel that is first from employee’s home to a customer, and then to office

• At end of workday, travel that is first from office to a customer, and then to employee’s home.


4. DOCUMENTATION

Clients must properly document the business versus personal use of the vehicle.

CRA generally accepts the following forms of documentation:

Full logbook: A full logbook is maintained for the entire year – showing the destinations, distances traveled and the purpose for each trip.

Sample period logbook: A logbook for a continuous three-month period will be accepted if:

– Client already has a logbook covering a full 12-month period that was typical for the business;

– Client maintains a logbook for a sample period of at least one continuous three-month period in each subsequent year;

– The distances travelled and the business use of the vehicle during the three-month sample period is within 10% of the corresponding figures for the same three-month period in the base year; and

– The calculated annual business use of the vehicle in a subsequent year does not go up or down by more than 10% in comparison to a typical full 12-month period.

Alternative records: Claims for a very low amount of business use do not require extensive records to demonstrate business travel. Acceptable evidence includes:

– General books and records of the corporation that indicate reasons for driving requirements;

– Appointment diaries indicating addresses visited and the reasons for those visits;

– Logs of service calls; or

– Purchase and sales invoices indicating deliveries.

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