CRA Mileage Rate 2026:
Canadian Tax Deduction Guide

What is the CRA Automobile Allowance Rate?

The Canada Revenue Agency (CRA) publishes an annual automobile allowance rate — also called the prescribed per-kilometre rate — that employers and self-employed individuals use to calculate the reasonable cost of using a personal vehicle for employment or business purposes.

When your employer reimburses you at or below this rate, the allowance is not taxable income. When you're self-employed, you can use it to calculate your vehicle expense deduction on your T1 return instead of tracking every individual expense. It's a simplified, CRA-approved method that covers fuel, maintenance, insurance, and depreciation in a single per-kilometre figure.

For 2026, the rate is $0.73 per kilometre for the first 5,000 km of business travel, and $0.67 per kilometre for each kilometre after that.

2026 Rates and Tiered System Explained

Canada uses a two-tier rate system, unlike the US flat rate. The higher first-tier rate acknowledges that the fixed costs of vehicle ownership (insurance, registration, financing) are spread across your total annual kilometres — so if you only drive a small amount for business, each kilometre costs proportionally more.

Kilometres Driven	2026 Rate	Province/Territory
First 5,000 km	$0.73/km	All provinces except Yukon, NWT, Nunavut
Each km over 5,000	$0.67/km	All provinces except Yukon, NWT, Nunavut
First 5,000 km (North)	$0.77/km	Yukon, Northwest Territories, Nunavut
Each km over 5,000 (North)	$0.71/km	Yukon, Northwest Territories, Nunavut

Who Can Claim — Self-Employed vs. Employees

Self-Employed Individuals

If you're a sole proprietor, freelancer, or independent contractor (consultant, Uber driver, DoorDash courier, real estate agent, tradesperson), you can deduct vehicle expenses related to earning business income on your T1 return — typically on Form T2125 (Statement of Business or Professional Activities). You choose between the per-kilometre rate or the actual expense method each year.

Commission Employees (T2200)

If you're a salaried employee who earns commissions and is required by your employer to use your own vehicle for work, you may be able to claim motor vehicle expenses. However, you must obtain a signed Form T2200 from your employer confirming this condition of employment.

Regular Salaried Employees

Most regular employees cannot claim vehicle expenses for travel between home and a fixed workplace — that's commuting and is not deductible in Canada either. However, if your employer pays you an allowance below the CRA rate, you can claim the difference as a deduction.

T2200: Declaration of Conditions of Employment

The T2200 is a CRA form that your employer must complete and sign to confirm you were required to use your personal vehicle for work duties, that you were not fully reimbursed for those expenses, and that you paid those expenses yourself. Without a signed T2200, the CRA will generally disallow a commission employee's vehicle claim.

Key points about T2200:

• Your employer completes and signs it — you do not submit it with your return, but you must keep it on file in case of an audit
• It covers a single tax year
• You need a new T2200 each year, even if your employment conditions haven't changed
• Self-employed individuals do not need a T2200 — it's for employees only

How to Calculate Your Vehicle Expense Deduction

For self-employed individuals using the per-kilometre method:

At a 30% marginal tax rate, that $9,345 deduction saves $2,803 in taxes. Accurate kilometre tracking is the only thing standing between you and that savings.

Northern Territories Rates

Residents of Yukon, Northwest Territories, and Nunavut face significantly higher vehicle operating costs — fuel alone can be 40–60% more expensive than in southern provinces. The CRA accounts for this with elevated rates: $0.77/km for the first 5,000 km and $0.71/km for each km over 5,000. If you live in these territories, make sure your mileage app correctly applies the northern rate.

Record-Keeping Requirements

The CRA requires you to maintain a logbook for the entire year — or in some cases a sample logbook covering a minimum 3-month representative period — that records each business trip with:

• Date of the trip
• Destination (city or address)
• Reason for the trip (e.g., "client meeting — Maple Leaf Properties")
• Odometer reading at start and end of the trip (or total km for the trip)

You also need to record your total annual kilometres driven (both business and personal) to establish your business-use percentage. Take an odometer photo on January 1 and December 31 each year.

Common CRA Audit Triggers

Claiming 100% business use

Unless you have a dedicated business-only vehicle (rare for most self-employed individuals), claiming 100% business use is a red flag. The CRA will question how you got to the grocery store or drove your kids to school.

Round-number km claims

Claiming exactly 10,000 or 15,000 km for business without detailed records looks estimated rather than tracked. Actual mileage logs produce irregular, specific numbers that are far more credible.

Disproportionate vehicle expenses relative to income

If your vehicle deduction is larger than your net business income, the CRA may review whether the business was genuinely operating or whether personal expenses are being misclassified.

No supporting logbook

This is the single most common reason CRA denies vehicle expense claims. If you can't produce a logbook, the CRA can disallow the deduction entirely — even if you did actually drive those kilometres for business.