CRA Mileage Rate 2026: How to Claim Vehicle Expenses for Your Business

If you use a vehicle for business in Canada, you have two ways to deduct those costs: track every actual expense and claim a percentage, or use the CRA's simplified per-kilometre rate and multiply it by your business kilometres. Most small business owners and self-employed individuals find the per-kilometre method far simpler — but it still requires a proper logbook.

The 2026 CRA Mileage Rates

These rates are set annually by the CRA based on vehicle operating costs across Canada. The rates for 2026 have been updated from 2025's rates of 70¢ and 64¢ respectively. If you drove 8,000 business kilometres in 2026, your deduction would be: (5,000 × $0.73) + (3,000 × $0.67) = $3,650 + $2,010 = $5,660.

The Two Methods for Claiming Vehicle Expenses

Method 1: Actual Expenses (Most Common for Self-Employed)

Track all actual vehicle costs and claim the business-use percentage. Eligible expenses include:

• Fuel and oil
• Insurance
• License and registration fees
• Repairs and maintenance
• Lease payments (subject to limits)
• Interest on a vehicle loan (subject to limits)
• Car washes and parking (for specific business trips)
• Capital Cost Allowance (depreciation) on the vehicle

The business-use percentage is calculated as: business kilometres ÷ total kilometres driven in the year. If you drove 12,000 km total and 8,400 were for business, your business-use percentage is 70%, and you can claim 70% of eligible vehicle expenses.

Method 2: Per-Kilometre Rate (Simpler, Often for Employees)

Multiply your business kilometres by the CRA prescribed rate. This is the rate your employer can pay you tax-free as a vehicle allowance. Employees who receive a reasonable per-km allowance from their employer cannot also claim vehicle expenses on their T1 — it's one or the other.

What Counts as a Business Kilometre?

This is where many business owners get tripped up. Commuting to your regular place of work does not count as business driving. The trip from your home to your office or store is personal — even if you're going to "work."

Business kilometres are:

• Driving to client meetings, job sites, or client locations
• Driving to pick up supplies or business materials
• Driving to a bank or government office for business purposes
• Driving between two different work locations
• Driving from your home to a client site if your home is your principal place of business

Personal kilometres include commuting, personal errands, and any trip not directly related to earning business income.

The Logbook: What the CRA Actually Requires

This is non-negotiable. The CRA requires a mileage logbook to support any vehicle deduction. Without it, your claim will be denied in an audit.

Every entry in your logbook must include:

• The date of the trip
• The destination
• The purpose of the trip (client name, meeting type, supplies purchased)
• The odometer reading at the start and end of the trip
• The number of kilometres driven

You also need to record your odometer reading at January 1 and December 31 each year to establish your total annual kilometres.

The CRA's Simplified Logbook Option

If you've kept a full logbook for at least one complete year and your driving pattern is consistent, the CRA allows you to use a three-month "sample" logbook in subsequent years to establish your business-use percentage — provided you track total kilometres for the full year. This can significantly reduce recordkeeping burden. Ask your bookkeeper if this option applies to your situation.

Passenger Vehicle Limits: Luxury Cars Are Capped

If you bought or leased a passenger vehicle, the CRA caps how much of its cost can be used to calculate Capital Cost Allowance (CCA) and interest deductions. For 2026:

• CCA cost limit: $38,000 (before HST/GST) — only this amount can be added to Class 10.1 for depreciation
• Lease cost limit: $1,100/month (before HST/GST)
• Interest deduction limit: $350/month

A $90,000 luxury car doesn't give you $90,000 worth of CCA. The deduction is capped at $38,000 × 30% (Class 10.1 rate) × your business-use percentage. Plan accordingly before purchasing expensive vehicles for the business.

Zero-Emission Vehicles (ZEVs): Different Rules

Electric and other zero-emission passenger vehicles have a higher CCA cost limit: $61,000 for 2026. They also qualify for accelerated CCA (Class 54 or 55), allowing you to deduct the full cost in Year 1 if the vehicle is used entirely for business. If you're considering an EV for your business, the tax treatment is significantly more favourable than for a gasoline vehicle.