Motor vehicle tax rates and limits 2018–2023

Summary#

These are the final regulations called Regulations Amending the Income Tax Regulations (Motor Vehicle Expenses and Benefits 2018–2023). They set the yearly limits and per‑kilometre rates that employers and businesses use when deducting vehicle costs or calculating employee taxable benefits for the 2018–2023 taxation years. The instrument was registered November 24, 2023 and published in the Canada Gazette on December 6, 2023.

What it does#

• Updates the capital cost ceilings (the maximum purchase price Canada treats for tax rules) for passenger vehicles and zero‑emission passenger vehicles:
  • Passenger vehicles: $30,000 (before 2022); $34,000 for vehicles acquired on or after January 1, 2022; $36,000 for vehicles acquired on or after January 1, 2023.
  • Zero‑emission passenger vehicles: $55,000 (before 2022); $59,000 for vehicles acquired on or after January 1, 2022; $61,000 for vehicles acquired on or after January 1, 2023.
• Keeps the maximum interest deduction for auto loans at $300 per month for taxation years 2018 through 2023.
• Sets the monthly lease cost limit that can be deducted:
  • $800 per month for leases entered into before 2022.
  • $900 per month for leases entered into on or after January 1, 2022.
  • $950 per month for leases entered into on or after January 1, 2023.
• Changes the tax‑exempt per‑kilometre allowance employers can pay employees for business driving (different rates for the first 5,000 km and for kilometres after 5,000 km). For example:
  • First 5,000 km: 55 cents (2018), 58 cents (2019), 59 cents (2020–2021), 61 cents (2022), 68 cents (2023).
  • Over 5,000 km: 49 cents (2018), 52 cents (2019), 53 cents (2020–2021), 55 cents (2022), 62 cents (2023).
  • Rates for Yukon, Northwest Territories and Nunavut are 4 cents higher than the rest of Canada.
• Adjusts the operating expense benefit per‑kilometre rate used to calculate an employee’s taxable benefit when an employer pays personal operating costs:
  • General rate: 26 cents (2018), 28 cents (2019–2020), 27 cents (2021), 29 cents (2022), 33 cents (2023).
  • For employees chiefly selling or leasing cars: 23 cents (2018), 25 cents (2019–2020), 24 cents (2021), 26 cents (2022), 30 cents (2023).
• Applies these changes retroactively to the relevant kilometres and taxation years from 2018 through 2023, as specified in the regulations.

Who's affected#

• Businesses that claim vehicle‑related tax deductions (capital cost allowance, interest, leasing costs).
• Employers who reimburse employees for business driving or who pay operating costs on employer‑provided vehicles.
• Employees who receive vehicle allowances or who use employer vehicles for personal use (taxable benefits may change).
• Tax professionals and payroll departments that calculate reimbursements and benefits for the years 2018–2023.
• Residents and employers in Yukon, Northwest Territories, and Nunavut, because their per‑kilometre rates are 4 cents higher.
• It may be unclear exactly how some individual returns are affected without checking specific year-by-year driving and lease/purchase dates.

Why it matters#

• These rules determine how much businesses and employees can deduct or must report for vehicle use. Small changes in cents or ceilings can change tax deductions and taxable benefits on a tax return.
• The amendments largely formalize rates that were previously announced and applied. That reduces the need for the Canada Revenue Agency to correct past returns and helps businesses avoid reassessments for 2018–2023.
• If you claim vehicle expenses, get reimbursed for driving, or receive employer‑paid vehicle costs, these numbers affect how much tax you pay or how much your employer can deduct.