February 25, 2021
All Tax Articles

In 2021, the maximum tax-free car allowance deductible for employers for allowances paid to their employees remains the same as the 2020 amount: 59 cents per kilometre for the first 5,000 kilometres driven, and 53 cents per kilometre for each additional kilometre driven during the year. For the Northwest Territories, Nunavut and Yukon, the maximum deductible tax-exempt allowance is 4 cents higher: 63 cents per kilometre for the first 5,000 kilometres driven, and 57 cents per kilometre above that. 

The rate to calculate the taxable benefit of employees relating to the personal portion of automobile operating expenses paid by their employers is decreased by one cent from the 2020 amount, to 27 cents per kilometre. For taxpayers who are employed principally in selling or leasing automobiles, the rate is decreased by one cent to 24 cents per kilometre.

For the deduction of car expenses, the limits have not changed since 2001. They are: 

For capital cost allowance (tax depreciation), the maximum cost of the car is $30,000, before applicable sales tax. (However, for eligible zero-emission vehicles such as electric and hybrid cars, the limit is $55,000, before sales tax.) 

For car lease costs, the maximum deduction is $800 before sales taxes per 30-day period. This can be reduced further if the manufacture’s list price of the car exceeds $35,294.

For interest on a car loan, the maximum deduction is $300 per 30-day period.

This letter summarizes recent tax developments and tax planning opportunities from a third-party affiliate; however, we recommend that you consult with an expert before embarking on any of the suggestions contained in this blog post, which are appropriate to your own specific requirements. Please feel free to get in touch with Lee & Sharpe to discuss anything detailed above, we would be pleased to help.
Sandy J. Lee

Hello my name is Sandy Lee, I am a partner at Lee & Sharpe.

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