CRA mileage rate 2026 questions have picked up as fuel costs climb. Gasoline prices in Canada were up 27.8% year over year in September, according to Statistics Canada’s consumer price index, and business owners who drive for work are asking how much they can claim or pay back tax-free.
For 2026, the CRA’s reasonable per-kilometre allowance is 73 cents for the first 5,000 business kilometres and 67 cents for each kilometre after that in the provinces. The CRA mileage rate is simple to use, but who can use it, and how, depends on whether you are an employee, an incorporated owner or a sole proprietor.
This guide covers the 2026 rates, the vehicle limits that go with them, and the records you need so a claim holds up.
2026 at a glance: 73 cents per km for the first 5,000 business km | 67 cents per km after that | territories 4 cents higher | operating cost benefit 34 cents per km | Class 10.1 vehicle cost ceiling $39,000 plus tax | lease limit $1,100 a month | interest limit $350 a month | Ask Corporate Empire to review your vehicle records
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The CRA mileage rate 2026 at a glance
The CRA sets a reasonable per-kilometre rate each year, which most people call the CRA mileage rate. Employers can pay employees up to this amount as a tax-free allowance for business driving in their own vehicles, and deduct it as a business expense.
| Year | First 5,000 km | Each km after |
|---|---|---|
| 2026 | 73 cents | 67 cents |
| 2025 | 72 cents | 66 cents |
| 2024 | 70 cents | 64 cents |
In Yukon, the Northwest Territories and Nunavut, the rates are 4 cents higher in each tier. You can confirm the current figures on the CRA automobile allowance rates page.
1. Who can use the per-kilometre rate
The CRA mileage rate 2026 applies to allowances an employer pays to an employee. That includes an owner-manager who is an employee of their own corporation. It does not apply to self-employed sole proprietors, who deduct their actual vehicle costs instead.
If you run an incorporated business and drive your personal car for work, the CRA mileage rate can work for you. Your corporation can pay you a per-kilometre allowance. The corporation deducts it, and you receive it tax-free, as long as it is reasonable and based only on business kilometres.
2. What a tax-free allowance looks like in dollars
Here is how the CRA mileage rate works for an Ontario owner-manager who drives 8,000 business kilometres in 2026 in a personal vehicle.
| Kilometres | Rate | Allowance |
|---|---|---|
| First 5,000 km | 73 cents | $3,650 |
| Next 3,000 km | 67 cents | $2,010 |
| Total for 8,000 km | $5,660 |
The corporation deducts $5,660, and the owner receives it without paying personal tax. Paid as salary instead, the owner would need to earn considerably more before tax to end up with the same amount.
3. Flat allowances are taxable
Paying a flat amount instead of the CRA mileage rate changes the tax result. A flat monthly car allowance, such as $500 a month regardless of how much you drive, is generally a taxable benefit to the employee. It must be included on the T4 and is subject to source deductions.
To be tax-free, the allowance must be based only on the number of business kilometres driven, at a reasonable rate. Combining a flat amount with a per-kilometre amount for the same driving usually makes the whole allowance taxable. Payroll staff should review how car allowances are set up before year-end T4 slips are prepared. Our payroll services Ontario guide covers T4 preparation.
4. Sole proprietors deduct actual costs
If you are self-employed and not incorporated, you cannot use the CRA mileage rate 2026 as a deduction. Instead, you deduct the business-use percentage of your actual vehicle costs, including:
- Fuel and oil
- Insurance
- Licence and registration
- Maintenance and repairs
- Interest on a car loan, up to $350 a month for 2026
- Lease payments, up to $1,100 a month plus tax for 2026
- Capital cost allowance on the vehicle
If you drove 15,000 kilometres in total and 9,000 were for business, you can deduct 60% of these costs. With fuel prices up sharply this year, keeping all fuel receipts makes a noticeable difference to the deduction.
5. Vehicle cost limits for 2026
For passenger vehicles bought in 2026, the maximum cost you can use for capital cost allowance is $39,000 plus tax, up from $38,000. Zero-emission passenger vehicles have a separate limit of $61,000 plus tax.
These limits matter if you are buying a vehicle for the business before year end. A $60,000 gas-powered SUV that counts as a passenger vehicle still only qualifies for capital cost allowance on $39,000. Some trucks and vans used mainly for business are not passenger vehicles and do not have this cap, so check the classification before you buy.
6. Keep a logbook
The CRA expects a record of business driving, whether you use the CRA mileage rate or deduct actual costs. Without one, a mileage claim or vehicle expense deduction is hard to defend. For each business trip, record:
- The date
- The destination
- The business purpose
- The kilometres driven
Also record your odometer reading at the start and end of each year. The CRA allows a simplified approach after a full base year: if you keep a complete logbook for one year, you can use a three-month sample in later years, as long as your business use stays within 10 percentage points of the base year. A mileage app on your phone can make this easier.
7. Driving from home to work is personal
For both the CRA mileage rate and actual-cost claims, driving from your home to your regular place of business is generally personal, not business, driving. Trips from your office to a client, a supplier, a job site or the bank are business driving.
If you work from a home office that qualifies as your principal place of business, trips from home to clients can count as business driving. This is a common area of disagreement in CRA reviews, so record the purpose of each trip clearly. Our CRA audit small business guide covers what reviewers usually ask for.
Per-km allowance or company vehicle?
Incorporated owners often weigh paying themselves at the CRA mileage rate a mileage allowance against having the corporation own or lease a vehicle. Here are both sides.
The case for a per-km allowance on your own car
- The allowance is tax-free to you and deductible to the corporation.
- No taxable standby charge or operating cost benefit to calculate.
- Simple to administer with a logbook and a monthly or quarterly expense claim.
- Works well when personal use of the vehicle is high.
The case for a corporate vehicle
- The corporation deducts actual costs, which can be higher than the per-km rate for expensive vehicles or heavy business use.
- Trucks and vans used mainly for business may avoid the passenger vehicle cost limits.
- The corporation pays for the vehicle directly, which can help cash flow if personal funds are tight.
- Personal use creates a taxable standby charge and operating cost benefit, which can be costly.
For many small business owners who drive a personal car for occasional client visits, an allowance at the CRA mileage rate is simpler and cheaper. Owners with heavy commercial driving should compare both with their accountant.
Vehicle expense checklist for 2026
- Start or update your mileage logbook now.
- Record your odometer reading on December 31.
- Switch any flat car allowance to the CRA mileage rate if you want it tax-free.
- Keep every fuel, repair and insurance receipt.
- Check vehicle classification and cost limits before buying a vehicle.
- Pay any 2026 allowances from the corporation and record them correctly.
Frequently asked questions
What is the CRA mileage rate 2026?
For 2026, the CRA reasonable per-kilometre allowance is 73 cents for the first 5,000 business kilometres and 67 cents after that, with rates 4 cents higher in the territories.
Can self-employed people use the CRA mileage rate?
No. Sole proprietors deduct the business-use share of their actual vehicle expenses. The per-km rate is for allowances paid by an employer, including a corporation paying its owner-manager.
Is a monthly car allowance taxable?
A flat monthly allowance not based on business kilometres is generally taxable and must be reported on the T4.
Do I need a logbook for mileage claims?
Yes. The CRA expects a record of business trips with date, destination, purpose and distance, plus start and end odometer readings for the year.
Keep your vehicle records clean
Corporate Empire keeps the books for Ontario small businesses and corporations, including expense claims, mileage allowances and year-end records your accountant can file from. Contact Corporate Empire or see our bookkeeping services.
This article is general information as of October 23, 2026, and is not tax advice. Gasoline figure from Statistics Canada’s September 2026 consumer price index, as reported by investingLive. Speak with a CPA about your situation.
