Quick answer
To deduct vehicle costs in Canada you claim your actual expenses multiplied by your business-use percentage from a logbook; there is no flat per-kilometre deduction for business use. If your employer reimburses you instead, the CRA tax-free rate for 2026 is 73 cents per kilometre for the first 5,000 km and 67 cents after that, with higher rates in the territories.
Are vehicle expenses tax deductible in Canada?
The business use of a vehicle is deductible; personal use, including ordinary commuting between home and your regular workplace, is not. Travel to clients, between work locations, or to a temporary site counts as business use. You deduct only the business-use proportion of your costs.
Canada does not use a flat cents-per-kilometre deduction for business driving. Instead you total your actual vehicle costs (fuel, insurance, maintenance, licensing, interest, and capital cost allowance) and apply your business-use percentage. The per-kilometre rates the CRA publishes are the limits for tax-free allowances an employer can pay, not a deduction you claim directly. See the wider Canadian expense rules for how this fits with GST/HST credits.
How much can you claim?
If you deduct your own costs, you claim the business-use percentage of every running cost plus capital cost allowance on the vehicle, subject to the passenger-vehicle ceiling. If your employer reimburses you, the 2026 tax-free per-kilometre allowance rates are [2] :
| Region | First 5,000 km | Each additional km |
|---|---|---|
| Provinces | 73c | 67c |
| Territories | 77c | 71c |
Worked example. A self-employed designer drives 24,000 km in the year, of which 9,600 km (40%) is business. Her total vehicle costs (fuel, insurance, maintenance, licensing) are $11,000, plus capital cost allowance. She deducts 40% of the running costs, which is $4,400, plus 40% of her allowable capital cost allowance. For passenger vehicles bought in 2026, capital cost allowance is limited to a cost of $39,000 before tax, interest to $350 a month and lease payments to $1,100 a month [2] . She cannot use the 73-cent rate; that figure only applies to an employer paying her a tax-free allowance.
Record-keeping requirements
Keep a logbook recording your business and total kilometres. For each trip, record the date, destination, purpose and kilometres, plus odometer readings at the start and end of the year [1] . After a full-year base logbook, the CRA accepts a three-month sample, but if the result moves more than 10% from the base year, the base year is no longer reliable [1] . Keep your fuel, insurance, maintenance, and licensing receipts. Records must be kept for six years.
How to claim, step by step
- Confirm the travel is business use, not personal commuting.
- Keep a logbook to establish your business-use percentage.
- Total your actual vehicle costs for the year and apply that percentage.
- Add capital cost allowance on the vehicle, subject to the passenger-vehicle ceiling.
- If you are a GST/HST registrant, claim input tax credits on the business-use portion of the GST/HST in your costs.
- Record the deduction and keep your logbook and receipts for six years.
Common mistakes
- Trying to deduct a flat 73 cents per kilometre. That is an employer allowance rate, not a deduction.
- Claiming home-to-work commuting as business use.
- Estimating the business-use percentage with no logbook to support it.
- Claiming the full cost of a vehicle used partly for personal trips.
- Trying to recover PST as an input tax credit; only GST/HST is recoverable.
Software that helps
The business-use percentage is only as defensible as the logbook behind it.
- MileIQ logs trips automatically and exports a CRA-ready logbook.
- ExpenseFlow captures fuel, insurance, and maintenance receipts as they arrive, codes each with the correct GST/HST treatment for the province, and syncs them to Xero or QuickBooks so the actual-cost records behind a vehicle claim are in one place.
- QuickBooks mileage tracking ties trips to the vehicle account for self-employed filers.
FAQ
See the answered questions above for the 2026 rates, the actual-cost method, the business-use percentage, commuting, and GST/HST.
References
Sources and references
Every figure, threshold, deadline, and regulatory rule cited in this guide is traceable to an official government publication. URLs are reproduced in full so any reader can verify the claim at source. Numbers are subject to change at each fiscal event; we re-check this list at every quarterly refresh of this guide.
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[1]
CRA · Motor vehicle expenses
https://www.canada.ca/en/revenue-agency/services/tax/businesses/small-businesses-self-employed-income/business-income-tax-reporting/business-expenses/motor-vehicle-expenses.htmlUpdated 17 August 2026. Business share formula; logbook details; base year and three-month sample; 10% rule; line 9281 and CCA line 9936.
Retrieved 2026-10-10
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[2]
Department of Finance Canada · Government announces the 2026 automobile deduction limits and expense benefit rates for businesses
https://www.canada.ca/en/department-finance/news/2026/01/government-announces-the-2026-automobile-deduction-limits-and-expense-benefit-rates-for-businesses.html14 January 2026. CCA ceiling $39,000; ZEV $61,000; lease $1,100 a month; interest $350 a month; allowance 73c/67c provinces, 77c/71c territories.
Retrieved 2026-10-10
From ExpenseFlow
GST/HST coding on autopilot
ExpenseFlow reads every receipt, assigns the right GST/HST treatment and account code, and syncs to Xero or QuickBooks Online once you approve.