Government Announces 2023 Automobile Allowances & Deduction Limits

With the holidays all wrapped up, tax season has made its way back around. And, in the true spirit of everyone’s favourite time of year, the Department of Finance Canada has announced the 2023 Automobile Deduction Limits and Expense Benefit Rates for Businesses.

The scope of this policy includes real estate agents, who actively use their vehicles to travel between showing and listing appointments, to their brokerages, to meetings with clients, and all trips that are entailed within their workday.

The 2023 automobile income tax deduction limits and expense benefit came into effect on January 1, 2023:

Capital Cost Allowance (CCA) for Passenger Vehicles

The before-tax CCA deduction limits for passenger vehicles (new and used) acquired on or after January 1, 2023, will be increased as follows:

  • Zero-emission passenger vehicles (Class 54) – from $59,000 to $61,000
  • Passenger vehicles (Class 10.1) – from $34,000 to $36,000

Leasing Costs

Deductible leasing costs for new leases entered into on or after January 1, 2023, will be increased from $900 to $950 per month (before tax).

Tax-Exempt Allowances

The limit on the deduction of tax-exempt allowances paid by employers to employees who use their personal vehicle for business purposes in the provinces will increase as follows:

  • Province: from 61 cents to 68 cents per kilometre for the first 5,000 kilometres driven, and 62 cents for each additional kilometre.
  • Territories: from 65 cents to 72 cents per kilometre for the first 5,000 kilometres driven, and 66 cents for each additional kilometre.

Taxable Benefit Rates

If an employee is reimbursed for the business use of their personal vehicle, the general prescribed rate used to determine their taxable benefit relating to the personal portion of automobile expenses paid by their employers will be increased by four cents from 29 cents to 33 cents per kilometre.

For those who are employed principally in selling or leasing automobiles, the rate used to determine the employee’s taxable benefit will be increased from 26 cents to 30 cents per kilometre.

Interest Deduction on Automobile Loans

For 2023, you can deduct up to $300 per month for new automobile loans, which remains unchanged from 2022. These changes come as inflation rises to an all-time high across Canada and the cost-of-living soars in the Fraser Valley as reflected in the Consumer Price Index (CPI). As a result, REALTORS® that file their taxes on time can look forward to a welcomed surplus of benefits through these higher deductions. It is crucial to note that the amount of the benefit reflects the costs of operating a vehicle. To ensure you are receiving the maximum coverage and benefits as a Realtor, it is important that the total and business kilometres are tracked throughout the year in a record log in an accurate manner. As an employer, you are responsible for remitting GST/HST on employee taxable benefits unless the benefit is tax-exempt or zero-rated. A common example of a tax benefit that is not exempt includes the automobile standby charge and operating expense benefit. The rate that needs to be remitted depends on the location your employee ordinarily worked in or the location to which he or she ordinarily reported to, which is typically your brokerage office.