Vehicle Claims Unchanged 2021 vs 2020, and Standby Charge Flexibility for 2020 T4s! Good news here!
The government of Canada announced the 2021 automobile rates. Since most clients use kilometer reimbursement in the past that drive more than 25,000 business kms, the rates remain the same in 2021 versus 2020.
However, for a select few that have a company owned vehicle and a taxable benefit claim, the government has added some flexibility to calculating the taxable benefit on the T4. This is good news in the pandemic as a lot of business travel is down and that would be a much larger taxable benefit for 2020 if the personal driving was the same or higher in 2020 which then has a personal tax cost. So by being able to use 2019 calculations this can save money. Another pandemic item to consider at T4 time.
Here are the details
Standby charge changes and automobile limits/rates
On December 21, 2020, the department of Finance announced not only the 2021 automobile limits, but also changes to the Automobile standby charge due to COVID-19.
Standby charge changes In light of the impact COVID-19 lockdowns and public health measures have had on how employees use their employer-provided vehicles, the government is also proposing temporary adjustments to the automobile standby charge. For the 2020 and 2021 taxation year, it is proposed that employees be allowed to use their 2019 automobile usage to determine eligibility for the reduced standby charge. Only employees with an automobile provided by the same employer as in 2019 would be eligible for this option.
Tax-exempt allowance The limit on the deduction of tax-exempt allowances paid by employers to employees who use their personal vehicle for business purposes will remain at 59 cents per kilometre for the first 5,000 kilometres driven, and 53 cents per kilometre for each additional kilometre. For the Northwest Territories, Nunavut and Yukon the allowance is 4 cents higher, and will remain at 63 cents per kilometre for the first 5,000 kilometres driven, and 57 cents per kilometre for each additional kilometre.
Deduction Limits The claims relating to CCA, interest on automobile loans, and leasing costs remain the same.
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