By Nicole Byres.

The Department of Finance Canada has announced the following business expense deduction limits for automobile operating expense benefits, effective 2012:

• The upper limit on the cost of passenger vehicles that can be claimed as a business expense (for capital cost allowance purposes) remains at $30,000 (plus federal/provincial sales taxes) for purchases after 2011.
• The upper limit on deductible leasing costs also remains the same at $800 per month (plus federal/provincial sales taxes).
• The maximum allowable interest deduction for amounts borrowed to purchase an automobile after 2011 also remains at $300 per month.
• The maximum tax-exempt automobile allowance that an employee can receive for use of their personal vehicles for business will be $0.53 per kilometer for the first 5,000 km, and $0.47 for each km thereafter. This allowance is to compensate the employee for all costs associated with owning and operating a vehicle, such as depreciation, financing, insurance, maintenance and fuel costs.
• The prescribed rate for determining the taxable benefit for personal use of a vehicle paid for by an employer for exclusive use by an employee will be $0.26 per km, unless the employee is engaged in the business of leasing or selling of automobiles, in which case the taxable benefit rate will be $0.23 per km.

To see a copy of the December 29, 2011, news release, go to the Department of Finance website at http://www.fin.gc.ca/n11/11-146-eng.asp