Class 10.1 limit 2026: $39,000 plus sales tax, up from $38,000

The 2026 automobile limits next to 2025

Finance Canada announced the 2026 limits on January 14, 2026, effective January 1. Only the class 10.1 ceiling moved: it rose $1,000 to $39,000, before tax, for new and used vehicles acquired on or after January 1, 2026 canada.ca.

The CRA's class pages and Guide T4002 still show the 2025 ceiling of $38,000 as of October 2026, so a client looking there will see last year's number canada.ca. Each limit follows a date: the acquisition date for the CCA ceilings, the date the lease was entered into for the lease limit, and the date the loan was entered into for the interest limit.

The per kilometre allowance and benefit rates come from the same announcement. See the 2026 allowance rates and the operating cost benefit.

How sales tax fits on top of the $39,000

Two steps, and they use different numbers. First, the class test uses the price before GST/HST or PST: a passenger vehicle bought in 2026 for more than $39,000 before tax goes in class 10.1, anything at or under it goes in class 10. Second, the capital cost of a class 10.1 vehicle is the ceiling plus the tax calculated on the ceiling, not on the full price canada.ca.

The rates are the CRA's current GST/HST rates by province. Nova Scotia's HST fell to 14% on April 1, 2025, so older worksheets at 15% overstate the cost canada.ca.

If your client is a GST/HST registrant and claims an input tax credit on the vehicle, the CRA says to subtract it from the capital cost. With business use of 90% or more, take it off before you record the cost. Under 90%, you take it off the opening UCC of the following year instead canada.ca.

The ceiling itself comes from paragraph 13(7)(g) of the Income Tax Act, which deems the capital cost of a passenger vehicle costing more than the prescribed amount to be that prescribed amount laws-lois.justice.gc.ca.

Worked example: a $70,000 car bought in Ontario in 2026

Your client buys a $70,000 car in Ontario in March 2026, uses it only for business, has no input tax credit to claim and sells it in 2028. The price is over $39,000, so it goes in its own class 10.1.

The 2026 line uses the reaccelerated investment incentive. For reaccelerated investment incentive property that becomes available for use before 2030, Regulation 1100(2) adds half the net addition to the base instead of taking half off, so the first claim is 1.5 times the 30% rate, or 45%, rather than 15% under the half year rule laws-lois.justice.gc.ca. Without it, the 2026 claim would be 15%, or $6,610.50.

The 2024 Fall Economic Statement proposed this for property acquired on or after January 1, 2025 and available for use before 2030 budget.canada.ca, and Budget 2025 confirmed it budget.canada.ca. It is now law: Regulation 1104 defines reaccelerated investment incentive property as property acquired after 2024 and available for use before 2034, and carves out only classes 54 to 56, so class 10.1 qualifies laws-lois.justice.gc.ca. The CRA's AII page, last updated July 2025, still describes only the old phase out that suspended the half year rule for 2024 to 2027 canada.ca.

For a sole proprietor who also drives the car personally, each year's claim is then cut to the business use percentage from the logbook.

The class 10.1 rules that catch people

One class per vehicle. Each class 10.1 vehicle is listed on its own line, never pooled with other cars canada.ca. Class 54 works differently: it does not create a separate class for each vehicle over its ceiling canada.ca.

No recapture. Subsection 13(2) keeps a recapture on a passenger vehicle over the prescribed cost out of income, unless the vehicle was designated immediate expensing property laws-lois.justice.gc.ca.

No terminal loss. Paragraph 20(16.1)(a) turns off the terminal loss for a passenger vehicle costing more than the prescribed amount, so the $14,421.91 left in the example simply disappears laws-lois.justice.gc.ca. The CRA states the same rule, with the same exception for designated immediate expensing property canada.ca.

Half the CCA in the year of sale. Regulation 1100(2.5) lets your client claim CCA in the year of disposal as if the car were still owned, but for half the days in the year, provided it was owned at the end of the previous year. No CCA is allowed on it in any later year laws-lois.justice.gc.ca.

Related party purchases. If your client buys the car from someone they don't deal with at arm's length, such as their own corporation, paragraph 13(7)(h) sets the capital cost at the least of fair market value, the seller's cost amount and the prescribed ceiling laws-lois.justice.gc.ca.

Leasing and financing instead of buying

A leased passenger vehicle has no CCA. The deduction for 2026 leases is capped at $1,100 a month before tax, and the CRA's leasing chart takes the lesser of two tests: the monthly limit plus GST/HST or PST times days leased over 30, and a test that scales the lease charges by the class 10.1 ceiling over 85% of the manufacturer's list price canada.ca. The 2025 chart grosses the $38,000 ceiling up to $44,706 for that second test, and the CRA's example applies a 1.13 factor for 5% GST plus 8% PST to the monthly limit canada.ca.

In Ontario, the monthly cap works out to $1,100 plus 13% HST, or $1,243 a month.

Interest on a loan to buy the car is capped at $350 a month for loans entered into in 2026 canada.ca. The T4002 chart prorates it by day: $350 divided by 30, times 365 days, gives $4,258 for a full year, and your client deducts the lesser of that and the interest actually paid canada.ca.