![]() DescriptionĪlthough most of the limits and rates that applied in 2015 will continue to apply in 2016, there are two changes taking effect as of 2016, as announced in the news release.įirstly, the limit on the deduction of tax-exempt allowances that are paid by employers to employees who use their personal vehicle for business purposes is reduced by 1 cent to 54 cents per kilometre for the first 5 000 kilometres driven, and to 48 cents per kilometre for each additional kilometre.įor the Northwest Territories, Nunavut and Yukon, the tax-exempt allowance is 4 cents higher, and is reduced by 1 cent to 58 cents per kilometre for the first 5 000 kilometres driven, and to 52 cents per kilometre for each additional kilometre. To implement changes in the cost of acquiring, financing and operating automobiles for business purposes, as announced by the Minister of Finance in a news release entitled “Government Announces the 2016 Automobile Deduction Limits and Expense Benefit Rates for Business” issued by the Department of Finance on December 24, 2015. The rate is set under section 7305.1 of the ITR. - The operating expense benefit rate determines the amount of an employee’s taxable benefit where an employer pays the operating costs of an automobile that the employee uses for personal purposes.The limit is set under section 7306 of the ITR. - The tax-exempt per-kilometre allowance limit is a simplifying provision allowing employers to deduct, at a rate no higher than the prescribed limit, the cost of reimbursing employees who use their personal vehicle for business use.The limit is set under subsection 7307(3) of the ITR. - The leasing limit restricts the deductibility of automobile leasing costs.The limit is set under subsection 7307(2) of the ITR. - The interest expense limit restricts the deductibility of interest related to financing the purchase of an automobile that costs more than the capital cost ceiling.The ceiling is set under subsection 7307(1) of the ITR. It reflects the cost of acquiring an automobile that is generally acceptable for business purposes. - The capital cost ceiling restricts the cost of an automobile on which capital cost allowance may be claimed.There are five prescribed limits and rates that help define the level of automobile expense deductions and taxable benefits allowed under the Act. These are assessed each year to determine if they need to be adjusted to reflect changes in the costs of acquiring, financing and operating an automobile. These rules, described in detail below, use various rates and limits to reflect the costs of automobile usage for business purposes. The Income Tax Act (the Act) contains several rules related to the treatment of automobile expenses and benefits for businesses and employees for income tax purposes. ( This statement is not part of the Regulations.) IssuesĪs the costs of acquiring, financing and operating a motor vehicle change, the expense benefit rates, income tax deduction limits and capital cost ceiling (described below) are adjusted through amendments to the Income Tax Regulations (ITR) to reflect changes in the underlying costs. (a) the product of 48 cents multiplied by the number of those kilometres ģ Sections 1 and 2 apply to kilometres driven after 2015.(a) if a taxpayer is employed in a taxation year by a particular person principally in selling or leasing automobiles and an automobile is made available in the year to the taxpayer or a person related to the taxpayer by the particular person or a person related to the particular person, 23 cents andĢ Paragraph 7306(a) of the Regulations is replaced by the following:.Regulations Amending the Income Tax Regulations (Motor Vehicle Expenses and Benefits 2016) Amendmentsġ Paragraphs 7305.1(a) and (b) of the Income Tax Regulations (see footnote 1) are replaced by the following: His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 221 (see footnote a) of the Income Tax Act (see footnote b), makes the annexed Regulations Amending the Income Tax Regulations (Motor Vehicle Expenses and Benefits 2016). INCOME TAX ACT Regulations Amending the Income Tax Regulations (Motor Vehicle Expenses and Benefits 2016) ![]()
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