2026 Automobile Deduction Limits: Class 10.1 and Leasing Caps Updated

Key takeaways

• The Class 10.1 passenger vehicle ceiling for 2026 is $38,000 (plus applicable taxes)
• Monthly deductible lease cost is capped at $1,050 per month (plus taxes)
• Zero-emission vehicles have a higher ceiling: $61,000 for CCA purposes
• Prescribed automobile benefit rate for employees is $0.33/km for the first 5,000 km, $0.27/km after
• These limits are set annually by the Department of Finance

The CRA sets automobile deduction limits each year to ensure that high-cost luxury vehicles do not generate disproportionate tax deductions for business use. For 2026, the Department of Finance has set the Class 10.1 passenger vehicle ceiling at $38,000 before tax, unchanged from 2025.

Class 10.1 — passenger vehicle CCA

A passenger vehicle acquired for business use is included in CCA Class 10.1 if its cost (before taxes) exceeds the annual ceiling ($38,000 for 2026). The CCA deduction is limited to 30% per year declining balance, but only on the capped amount — not the actual purchase price.

If you buy a vehicle for $65,000, your maximum CCA base is $38,000. In year 1 (with the half-year rule), the maximum CCA deduction is $38,000 × 30% × 50% = $5,700, regardless of what you paid. The $27,000 above the cap is simply not deductible.

Leased vehicles

The monthly deductible lease cost is $1,050 per month for 2026. If your lease payment is $1,400 per month, only $1,050 qualifies as a deductible business expense (pro-rated for business use percentage). The restriction applies to the lease payment itself, not insurance or operating costs.

There is also a formula that limits deductions based on the manufacturer's list price if it exceeds the vehicle cost ceiling, preventing artificial structuring of lease payments to circumvent the rules.

Zero-emission vehicles

Zero-emission passenger vehicles (Class 54) have a higher cost ceiling of $61,000 for 2026. They also qualify for 100% first-year CCA (immediate expensing) under the accelerated investment incentive for zero-emission vehicles. The $61,000 limit applies to the vehicle's cost for both CCA and lease deduction calculation purposes.