Mileage and Vehicle Deductions in Canada (2026 Guide)

If you are self-employed in Canada and use your own vehicle for work, you deduct the business share of what the vehicle actually costs you to run: business kilometres divided by total kilometres, multiplied by your eligible expenses, claimed on Form T2125. The per-kilometre figure you may have heard quoted (73 cents for the first 5,000 km in 2026) is not that deduction. It is the limit on tax-free allowances that employers pay employees, and it only becomes relevant to you if someone, such as your own corporation, is paying you an allowance.

This guide covers the 2026 tax year: deductible costs, Chart A, the interest and lease caps, capital cost allowance (CCA), the CRA logbook and the business-use percentage. Every rule and figure comes from canada.ca (sources at the end); the newest Guide T4002 and Form T2125 are the 2025 editions, so we flag 2026 figures not yet published. Examples are hypothetical.

The 2026 Rates and Limits

The Department of Finance announced the 2026 automobile limits on January 14, 2026. They apply from January 1, 2026:

• Per-kilometre allowance limit, provinces: 73¢ for the first 5,000 km and 67¢ for each additional kilometre (2025: 72¢ and 66¢)
• Per-kilometre allowance limit, territories: 77¢ for the first 5,000 km and 71¢ for each additional kilometre (2025: 76¢ and 70¢)
• Capital cost ceiling for Class 10.1 passenger vehicles: $39,000 before tax (up from $38,000 in 2025)
• Capital cost ceiling for Class 54 zero-emission passenger vehicles: $61,000 before tax (unchanged)
• Deductible leasing costs: $1,100 per month before tax for new leases entered into on or after January 1, 2026 (unchanged)
• Deductible interest: $350 per month for new automobile loans entered into on or after January 1, 2026 (unchanged)

The leasing, interest and capital cost ceilings apply only to "passenger vehicles": vehicles you own (other than zero-emission vehicles) or lease that are designed mainly to carry people and seat a driver and no more than eight passengers. The CRA's Type of vehicle chart sorts pickups, vans and SUVs by use: a pickup used more than 50% to transport goods or equipment, for example, is not a passenger vehicle.

Two Methods: Actual Expenses vs. the Per-Kilometre Allowance

Actual expenses is the only vehicle method on Form T2125: total what the vehicle cost you in the year, then claim the business-use share. CCA on a vehicle you own is claimed separately, at the same percentage.

The per-kilometre allowance is an employment rule: an employer pays an employee a set amount per business kilometre, tax-free if it is based only on business kilometres and the rate is reasonable. If your own corporation pays you one, this is the method that applies. A sole proprietor filing a T2125 cannot choose it.

Which Vehicle Costs Are Deductible

T4002 lists the expenses you can deduct to run a motor vehicle you use to earn business income. Each one is reduced to your business-use percentage, and the CRA allows them only when they are reasonable and you have receipts to support them:

• Fuel and oil, with every receipt, not just the card statement
• Electricity for a zero-emission vehicle
• Insurance
• Licence and registration fees
• Maintenance and repairs, with each invoice
• Interest on money borrowed to buy the vehicle, capped for passenger vehicles (Chart B)
• Leasing costs, capped for passenger vehicles (Chart C). Keep the lease: it shows the list price.

Two costs are not reduced by the business-use percentage. The CRA lets you deduct the full amount of parking fees related to your business activities and supplementary business insurance for the vehicle. The purchase price of a vehicle you own is never deducted as an expense. It goes through CCA, covered below.

How Chart A Works

Chart A, Motor vehicle expenses, is part of Form T2125. Its numbered amounts on the 2025 form run in this order:

• Amounts 1 and 2: kilometres driven in the fiscal period to earn business income, and total kilometres driven. Both come from your logbook and odometer readings.
• Amounts 3 to 11: fuel and oil, interest (from Chart B), insurance, licence and registration, maintenance and repairs, leasing (from Chart C), electricity for zero-emission vehicles, and other expenses you name.
• Amount 12: the total of amounts 3 to 11.
• Amount 13, the business-use part: amount 1 ÷ amount 2 × amount 12.
• Amounts 14 and 15: business parking fees and supplementary business insurance, added in full.
• Amount 16: amounts 13 to 15 added together. This is the figure you enter on line 9281, Motor vehicle expenses (not including CCA).

The capped figures feed in, not what you paid: Chart B's result goes into amount 4 and Chart C's into amount 8. CCA on the vehicle is calculated in Area A of the form and goes on line 9936. Partners who use a personal vehicle for partnership business claim on line 9943 instead. If you use more than one vehicle for business, keep a separate record for each and calculate each vehicle's expenses separately.

The Interest Cap: Chart B

If you borrowed to buy a passenger vehicle or a zero-emission passenger vehicle, Chart B limits the interest that enters Chart A. Available interest is the lesser of the interest payable (accrual method) or paid (cash method) in the fiscal period, and $350 ÷ 30 × the number of days in the period for which interest was payable or paid. For a full 365-day year that works out to $4,258. The 2025 form sets the $350 figure for passenger vehicles bought after 2023, and $300 for those bought after 2000 and before 2024. Interest above the cap is not deductible, and the capped amount is still reduced to your business-use share in Chart A.

The Lease Cap: Chart C

Chart C, Eligible leasing cost for passenger vehicles, applies the $1,100 monthly limit and a second limit tied to the vehicle's list price, then takes the lesser of the two. On the 2025 form:

• Amount 20: lease charges incurred for the vehicle in the current fiscal period.
• Amount 21: lease payments deducted for it in earlier fiscal periods.
• Amount 22: total days the vehicle was leased in the current and earlier fiscal periods.
• Amount 23: the manufacturer's list price.
• Amount 24: amount 23 or $44,706 plus sales tax, whichever is more, × 85%.
• Amount 25: ($1,100 plus sales tax) × amount 22 ÷ 30. Amount 26 is amount 25 minus amount 21.
• Amount 27: ($38,000 plus sales tax) × amount 20 ÷ amount 24.
• Amount 28, the eligible leasing cost: amount 26 or 27, whichever is less. It goes into amount 8 of Chart A.

The $44,706 and $38,000 figures follow the 2025 Class 10.1 ceiling ($38,000 × 100 ÷ 85 = $44,706), so check the 2026 form's figures before you fill it in. If you have a repayment owing to you under the lease, or imputed interest from refundable deposits over $1,000, the CRA says you cannot use the chart as printed.

Capital Cost Allowance: Classes 10 and 10.1

If you own the vehicle, you recover its cost through CCA rather than as an expense. Class 10 has a 30% rate and covers motor vehicles and some passenger vehicles. You use the declining balance method: each year's CCA is a percentage of the class's remaining balance, so the claim shrinks over time. A passenger vehicle that costs more than the ceiling for the year you acquired it goes into Class 10.1 instead, also at 30%, but with its own rules:

• Capped cost: the capital cost is limited to the ceiling plus GST/HST or PST on it. The ceilings are $30,000 for vehicles acquired before 2022, $34,000 in 2022, $36,000 in 2023, $37,000 in 2024, $38,000 in 2025 and $39,000 from January 1, 2026.
• One class per vehicle: each Class 10.1 vehicle is listed separately, not pooled.
• Year of sale: if you owned the vehicle at the end of the previous year, you may be able to claim 50% of the year's CCA in the year you sell it.
• No recapture or terminal loss: those rules do not apply to Class 10.1 passenger vehicles unless they were designated immediate expensing property.

In the year you acquire property, the half-year rule usually limits CCA to half the net addition. The accelerated investment incentive suspends that rule for eligible property acquired after November 20, 2018, and available for use before 2028: for property available for use from 2024 to 2027, the CRA puts the first-year allowance at two times the normal first-year deduction. The 2025 T4002 also describes a proposed reaccelerated incentive for property acquired after 2024, so confirm your vehicle's first-year treatment in the 2026 guide.

Zero-emission vehicles have their own classes: Class 54 (30%) for those that would otherwise be in Class 10 or 10.1, and Class 55 (40%) for those otherwise in Class 16. Each Class 54 zero-emission passenger vehicle has a capital cost limit of $61,000 plus sales tax.

In every class, CCA on a vehicle you also drive personally is reduced to the business-use share: in T4002's example, 12,000 of 18,000 km on $3,000 of CCA gives $2,000.

Worked Example in CAD

The figures below are hypothetical, chosen to show the arithmetic. Suppose a sole proprietor with a December 31 year-end drives 20,000 km in 2026, of which 8,000 km are business trips recorded in a logbook. Business use is 8,000 ÷ 20,000 = 40%. The year's vehicle costs are:

• Fuel: $2,600
• Insurance: $1,800
• Maintenance and repairs: $900
• Licence and registration: $150
• Loan interest: $1,500, below the full-year limit of $4,258, so all of it counts
• Total (amount 12): $6,950 × 40% = $2,780
• Business parking: $240, deducted in full rather than at 40%
• Amount on line 9281: $3,020

CCA on the vehicle goes on line 9936, also reduced to 40%. For comparison, an employer allowance for the same 8,000 business kilometres at the 2026 provincial rates could be at most 5,000 × $0.73 + 3,000 × $0.67 = $5,660. That is a tax-free payment from an employer, useful if you are deciding whether your corporation should reimburse you, but not a deduction a sole proprietor can claim.

The Logbook the CRA Expects

The CRA calls an accurate logbook of business travel kept for the entire year "the best evidence" to support the use of a vehicle. For each business trip, record:

• The date
• The destination
• The purpose
• The number of kilometres driven

Also record each vehicle's odometer reading at the start and end of your fiscal period, and, if you buy, sell or trade a vehicle during the year, its reading on that date. The two readings give total kilometres, the denominator of your business-use percentage. Where you started is not on the CRA's list, but recording it makes each entry easier to check.

Make the purpose specific: "site visit, kitchen renovation quote" ties a trip to the business in a way "client meeting" does not. Log trips when they happen rather than from memory at month end, include short trips, and if a business trip includes a personal errand, log only the business kilometres.

The Base Year and the Three-Month Sample

You do not have to log every trip forever. The CRA's simplified logbook rule works like this:

• Keep a full logbook for one complete 12-month period. This is your base year.
• In later years, keep a logbook for a three-month sample period instead.
• Calculate annual business use as (sample period % ÷ base-year % for the same months) × base-year annual %.
• The sample stands in for the year only if the result is within 10 percentage points of the base year, and the base year still reflects how you normally use the vehicle.
• If the result moves by more than 10 points, the sample covers only its own three months. For the rest of the year you need an actual record of travel, and the CRA suggests starting a new 12-month base year.

The CRA's own example: a base year with 49% annual business use, and 46% for April to June. A later year's April-to-June sample shows 51%. Calculated use is (51% ÷ 46%) × 49% = 54%. That is within the 39% to 59% band, so the CRA would accept 54% in the absence of contradictory evidence. Pick the sample months in advance. Because the base year keeps doing work in later years, its logbook must be kept for six years from the end of the last tax year it is used to support. All other records follow the usual rule of six years from the end of the tax year they relate to.

How to Calculate Your Business-Use Percentage

The formula is business kilometres ÷ total kilometres. At year end, your logbook should give you:

• Total kilometres driven: the end-of-year odometer reading minus the start-of-year reading.
• Business kilometres: the sum of all logged business trips.
• Business-use percentage: business kilometres ÷ total kilometres × 100.

That percentage applies to every Chart A expense and to the vehicle's CCA. The CRA's published example: 27,000 business kilometres out of 30,000 total, with $5,400 of expenses, gives 27,000 ÷ 30,000 × $5,400 = $4,860. Adding $40 of parking and $100 of supplementary business insurance in full brings the claim to $5,000.

The judgment call is which trips count as business. The CRA's longstanding position, set out in the archived Interpretation Bulletin IT-521R, is that driving between your home and your place of business is personal unless your home is the base of your business operations. If you have an office or other fixed workplace elsewhere, your home normally does not qualify. If you run the business from home and drive out to clients or job sites, those trips can be business travel. Travel between different premises of the same business is deductible.

Deadlines for the 2026 Tax Year

Self-employed individuals file by June 15, but any balance owing is due by April 30. For 2025 returns those dates were April 30 and June 15, 2026. The same rules put them at April 30 and June 15, 2027 for 2026, but the CRA had not published its dated 2026 calendar when this was written, so confirm before you file.

Frequently Asked Questions

Can I just claim the 73-cents-per-kilometre rate on my T2125? No. That rate is the limit on tax-free allowances employers pay employees. A sole proprietor claims the business share of actual vehicle costs through Chart A and line 9281, plus CCA on line 9936.

Is driving from home to a client's office deductible? It depends where your business is based. If your home is the base of your business operations and you have no office elsewhere, trips out to clients can count as business travel. If you have an office or other fixed workplace, travel between home and that workplace is personal.

Do I have to keep a logbook every year? You need one full 12-month logbook to set a base year. After that, a three-month sample logbook each year is enough, as long as the calculated annual business use stays within 10 percentage points of the base year.

Are parking costs reduced by my business-use percentage? No. The CRA lets you deduct the full amount of parking fees related to your business, and supplementary business insurance, without prorating them.

Can I deduct my full lease payment? Not always. For a passenger vehicle, Chart C caps the eligible leasing cost at the lesser of a $1,100-a-month limit and a limit tied to the manufacturer's list price. The capped amount is then reduced to your business-use share.

I bought a car in 2026 for $45,000. What can I claim? If it is a passenger vehicle, it goes into its own Class 10.1 and its capital cost is capped at $39,000 plus GST/HST or PST on that amount. CCA is claimed at 30% on the capped amount, subject to the first-year rules in Guide T4002, and reduced to your business-use share. A zero-emission passenger vehicle goes into Class 54 instead, with a $61,000 ceiling.

I'm an employee, not self-employed. Do these rules apply? Partly. Employees claim on line 22900 using Form T777, and only if the CRA's conditions are met, including a Form T2200 signed by the employer and no non-taxable vehicle allowance. The logbook and business-use rules are the same.