On December 29, 2011, the federal government announced automobile expense deduction limits and the prescribed rates for the automobile operating expense benefits that will apply in 2012.

A number of deduction limits will remain the same, including:

• the existing, $30,000 capital cost allowance ("CCA") ceiling with respect to passenger vehicles used for business purposes;
• the $800 per month limit on deductible leasing costs for leases entered into after 2011 (a separate restriction prorates deductible lease costs where the value of the vehicle exceeds the capital cost ceiling); and
• the $300 maximum allowable interest deduction for amounts borrowed to purchase an automobile, for loans related to vehicles acquired after 2011.

The limit on the deduction of tax-exempt allowances paid by employers to employees using their personal vehicle for business purposes for 2012 will be increased by 1 cent to 53 cents per kilometre for the first 5,000 kilometres driven and to 47 cents for each additional kilometre, with certain exceptions.

In addition, the general prescribed rate for determining the taxable benefit relating to the personal portion of automobile operating expenses paid by employers for 2012 will increase by 2 cents to 26 cents per kilometre. The prescribed rate in respect of taxpayers employed principally in selling or leasing automobiles, will increase by 2 cents to 23 cents per kilometre.