Department of Finance Canada announced the 2025 automobile income-tax deduction limits and expense benefit rates for businesses.
The ceiling for capital cost allowance on Class 10.1 passenger vehicles increased from $37,000 to $38,000 before tax for vehicles acquired on or after January 1, 2025.
The deductible tax-exempt allowance for employees using a personal vehicle for business increased to 72 cents per kilometre for the first 5,000 kilometres and 66 cents for each additional kilometre.
The general prescribed rate for calculating the taxable benefit on the personal portion of employer-paid automobile expenses increased to 34 cents per kilometre for 2025.
For employees principally selling or leasing automobiles, the taxable-benefit rate increased to 31 cents per kilometre for 2025.
The rates affect payroll and recordkeeping because vehicle limits determine deductible costs, employee allowances, and taxable benefits for the year.
For taxpayers, the result depends on the relevant tax year and whether the deduction, credit, or registered-account rule applies to their facts.