2011 Automobile Deduction Limits and Expense Benefit Rates for Business

The automobile expense deduction limits and the prescribed rates for the automobile operating expense benefit will remain unchanged for 2011. Specifically:

  • The ceiling on the capital cost of passenger vehicles for capital cost allowance (CCA) purposes will remain at $30,000 (plus applicable federal and provincial sales taxes) for purchases after 2010. This ceiling restricts the cost of a vehicle on which CCA may be claimed for business purposes.
  • The maximum allowable interest deduction for amounts borrowed to purchase an automobile will remain at $300 per month for loans related to vehicles acquired after 2010.
  • The limit on deductible leasing costs will remain at $800 per month (plus applicable federal and provincial sales taxes) for leases entered into after 2010. This limit 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 using their personal vehicle for business purposes for 2011 will remain at 52 cents per kilometre for the first 5,000 kilometres driven and 46 cents for each additional kilometre. For Yukon, the Northwest Territories and Nunavut, the tax-exempt allowance will remain at 56 cents for the first 5,000 kilometres driven and 50 cents for each additional kilometre.
  • The general prescribed rate used to determine the taxable benefit relating to the personal portion of automobile operating expenses paid by employers for 2011 will remain at 24 cents per kilometre. For taxpayers employed principally in selling or leasing automobiles, the prescribed rate will remain at 21 cents per kilometre. 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.

Employment Insurance 2011

 

Employment Insurance (EI) premiums will be increasing in 2011.  The maximum insurable earnings for 2011, applicable to all provinces and territories, will be $44,200 – up from $43,200 in 2010. The employee’s premium rate will be 1.78% for a maximum annual premium of $786.76 ($747.36 for 2010) for the country except for Quebec and 1.41% for a maximum annual premium of $623.22 for Quebec ($587.52 for 2010). Contributions for employers will remain at 1.4 times the amount of the employee’s premiums, for all provinces and territories, unless the employer qualifies for a reduced rate.

If it’s too good to be true….

Canada Revenue Agency issued the following warning to  taxpayers about donations to a gifting tax shelter.  For more information check out the following link:

http://www.cra-arc.gc.ca/nwsrm/lrts/2010/l101223-eng.html?=eml20101223

Warning: If you donate to a gifting tax shelter, expect to be audited

Each year, Canadian taxpayers participate in gifting arrangements that result in donation receipts worth three or four times the actual amount donated by the taxpayer. The Canada Revenue Agency (CRA) continues to warn Canadians against these gifting arrangements and audits those who participate.

To date, the CRA has denied over $4.5 billion in tax shelter gifting arrangement donations and reassessed over 130,000 taxpayers who have made donation claims through a gifting scheme.

For most claims, the CRA has denied the gift entirely. The CRA audits gifting arrangement tax shelters that provide donation receipts three or four times the out-of-pocket cost.

Decisions in recent court cases have concluded that the “donation” made by the taxpayer was not a gift or, where it was a gift, the amount did not exceed the out-of-pocket cost to the taxpayer. In the Maréchaux case, the Federal Court of Appeal upheld the Tax Court of Canada (TCC) decision that there was no gift given as a result of the defendant’s participation in a leveraged cash donation scheme. In the Lockie case, the TCC concluded that the gift in a buy-low-donate-high scheme was the amount paid by the taxpayer.

Tax shelter identification numbers

The CRA reminds taxpayers that tax shelter numbers are used for identification purposes only. Just because a tax shelter has an identification number does not mean that donations made to it will result in tax benefits.

Property of Marino Vereecke Professional Corporation, CA