The ceiling on the capital cost of passenger vehicles for capital cost allowance (CCA) purposes remains at $30,000(plus applicable federal and provincial sales taxes) for purchases after 2002. This ceiling restricts the cost of a vehicle on which CCA may be claimed for business purposes.

The limit on deductible leasing costs remains at $800 per month(plus applicable federal and provincial sales taxes)for leases entered into after 2002. This limit, which ensures that the level of deductions for leased and purchased vehicles is consistent, is one of two restrictions on the deduction of automobile lease payments. A separate restriction prorates deductible lease costs where the value of the vehicle exceeds the capital cost ceiling.

The limit on the deduction of tax-exempt allowances paid by employers to employees is 55¢ per kilometre for the first 5,000 kilometres driven and 49¢ for each additional kilometre. For the Yukon Territory, Northwest Territories and Nunavut, the tax-exempt allowance will increase to59¢ for the first 5,000kilometres driven and to 53¢ for each additional kilometre. The allowance amounts reflect the key cost components of owning and operating an automobile, such as depreciation, financing, maintenance and fuel costs.

The maximum allowable interest deduction for amounts borrowed to purchase an automobile remains at $300 per month for loans related to vehicles acquired after 2002.This limit reflects the reasonable cost of financing a vehicle for business purposes.

The general prescribed rate used to determine the taxable benefit relating to the personal portion of automobile operating expenses paid by employers remains at 27¢ per kilometre. For taxpayers employed principally in selling or leasing automobiles, the prescribed rate remains at 24¢per kilometre. The amount of the benefit reflects the costs of operating an automobile. The additional benefit of having an employer-provided vehicle available for personal use (i.e., the automobile standby charge) is calculated separately and is also included in the employee’s income.