2026 CRA Per-Kilometre Automobile Allowance Rates
The Government of Canada has announced the 2026 automobile deduction limits and expense benefit rates, effective January 1, 2026. The per-kilometre allowance rates increased by 1 cent across the board.
| Kilometres | 2026 Rate (Provinces) | Change |
|---|---|---|
| First 5,000 km | 73¢/km | +1¢ |
| After 5,000 km | 67¢/km | +1¢ |
These rates represent the maximum tax-exempt allowance that employers can pay employees who use personal vehicles for business. Self-employed individuals typically use the actual expense method on T2125 but use the business-use percentage determined by their mileage log.
Territorial Rates (Yukon, NWT, Nunavut)
Employees and business owners in Canada's three territories receive higher per-kilometre rates to reflect the higher cost of operating a vehicle in the North:
| Kilometres | 2026 Territorial Rate | Change |
|---|---|---|
| First 5,000 km | 77¢/km | +1¢ |
| After 5,000 km | 71¢/km | +1¢ |
2025 vs 2026 Rate Comparison
| Region | Tier | 2025 | 2026 |
|---|---|---|---|
| Provinces | First 5,000 km | 72¢/km | 73¢/km |
| Provinces | After 5,000 km | 66¢/km | 67¢/km |
| Territories | First 5,000 km | 76¢/km | 77¢/km |
| Territories | After 5,000 km | 70¢/km | 71¢/km |
Now that you know the rate — are you tracking your kilometres?
At 73¢/km, 10,000 business km = $7,300 in deductions
Start Tracking My Kilometres Free →Google Maps auto-calculates distances · CRA-ready mileage log · 60-day free trial
How to Calculate Your CRA Mileage Deduction
The CRA kilometric rate uses a two-tier system. The first 5,000 business kilometres get a higher rate, and every kilometre after that gets a lower rate:
Formula:
(First 5,000 km × $0.73) + (Remaining km × $0.67) = Allowance
Example Calculation
Marc is a freelance consultant in Ontario who drove 12,000 business kilometres in 2026:
| Tier | Kilometres | Rate | Amount |
|---|---|---|---|
| First 5,000 km | 5,000 km | × $0.73 | $3,650 |
| Remaining km | 7,000 km | × $0.67 | $4,690 |
| Total mileage allowance | $8,340 | ||
If Marc is an employee receiving this as a tax-free allowance, no further action is needed. If he's self-employed, he'll use his mileage log to determine the business-use percentage for the actual expense method on T2125.
T2125 Line 9200 — Motor Vehicle Expenses
Self-employed Canadians report vehicle expenses on Form T2125 — Statement of Business or Professional Activities. Here's where mileage fits in:
- Line 9281 — Motor vehicle expenses (the total amount of vehicle expenses multiplied by your business-use percentage)
- Part 7 — Motor vehicle expenses — This is where you calculate your business-use percentage based on your mileage log
- Line 9200 — Total motor vehicle expenses (appears on page 2 of T2125 as part of the expenses summary)
Unlike employees who receive a per-km allowance, self-employed individuals deduct the business-use percentage of actual vehicle expenses — fuel, insurance, maintenance, CCA (depreciation), licence fees, and interest on a car loan. Your mileage log determines the business-use percentage (business km ÷ total km).
The ExpenseBot Canada expense tracker helps track vehicle expenses alongside mileage and generates T2125-ready reports with the correct line references.
Business vs Personal Use
The CRA requires you to separate business driving from personal driving. Your mileage log must show both to calculate the business-use percentage.
What the CRA Considers Business Use
- Driving between clients or job sites
- Visiting suppliers or picking up business materials
- Driving to the bank or post office for business purposes
- Traveling to business meetings
- Real estate agents driving between showings
- Deliveries to customers
What Doesn't Qualify
- Commuting from home to your regular place of business
- Personal errands, even during business hours
- Driving to pick up lunch (unless for a business meeting)
If your home is your principal place of business, the CRA allows you to count drives from home to clients, temporary work locations, and business errands as business kilometres — including the first and last trip of the day.
Track mileage with Google Maps — CRA rates built in
ExpenseBot imports trips from Google Calendar and calculates distances automatically using the 2026 CRA kilometric rates.
Other tools that pair with this guide: free mileage log template for Google Sheets (IRS/CRA-compliant, pre-filled with 2026 rates), mileage reimbursement calculator (quick one-off deduction math), and the 2026 IRS mileage rate guide for US-side readers.
How to Track Mileage for CRA
The CRA expects a vehicle logbook that records each business trip as it happens — not reconstructed at year-end. Here are your options:
- Paper logbook — Record date, destination, purpose, and odometer readings. The CRA's traditional requirement, but easy to forget.
- Spreadsheet — Use a Google Sheets template with columns for date, start/end locations, purpose, and km driven. If you prefer automation, the Google Sheets expense tracker imports receipts from Gmail directly into your spreadsheet.
- GPS apps — Auto-record drives but drain battery and track all driving (personal included).
- Google Maps + Calendar integration — The ExpenseBot mileage tracker imports appointments from Google Calendar, uses Google Maps for distance calculation, and applies the current CRA rates automatically.
The CRA allows a simplified logbook method: keep a full logbook for one complete 12-month period, then in subsequent years keep a 3-month sample period. If the business-use percentage is within 10% of the base year, you can use it for the full year. ExpenseBot's continuous tracking makes the full-year method effortless.
Skip the manual logbook — ExpenseBot uses Google Maps to track every kilometre automatically.
Try It Free →CRA Mileage Log Requirements
The CRA requires the following information for each business trip in your vehicle logbook:
- Date of the trip
- Destination (where you drove)
- Business purpose (reason for the trip)
- Kilometres driven (odometer or calculated distance)
- Odometer readings at the start and end of the year (to determine total km driven)
- Total business km and total personal km for the year
Motor vehicle expenses are one of the CRA's most-audited items for self-employed individuals. If you claim vehicle expenses without a logbook, the CRA can disallow the entire deduction. Keep your logbook current throughout the year.
Digital mileage logs are fully accepted by the CRA. In fact, logs with Google Maps distance verification and calendar timestamps provide stronger audit support than handwritten entries.
Provincial Mileage Rates & Rules
The CRA mileage rate is a federal rate — it applies uniformly across all provinces. There is no separate "Ontario mileage rate" or "BC mileage rate." The 73¢/km (first 5,000 km) and 67¢/km (additional km) rate applies whether you drive in Toronto, Vancouver, Calgary, or anywhere else in Canada. The only exception is the territories (Yukon, NWT, Nunavut), which get a higher rate of 77¢/km and 71¢/km.
However, there are provincial differences in how your mileage deduction interacts with your overall tax return:
Ontario Mileage Rate 2026
The Ontario mileage rate for 2026 is the federal CRA rate: 73¢/km for the first 5,000 km, 67¢/km after. Ontario does not set a separate provincial mileage rate. Your mileage deduction on your T2125 reduces both your federal and Ontario provincial tax owing. Ontario's top combined marginal tax rate is 53.53%, meaning a $10,000 mileage deduction at the top bracket saves up to $5,353 in taxes. For gig economy drivers in the GTA — Uber, DoorDash, Instacart — mileage is typically the single largest deduction on your T2125.
British Columbia Mileage Rate 2026
The BC mileage rate for 2026 is the federal CRA rate: 73¢/km for the first 5,000 km, 67¢/km after. BC does not have a separate provincial rate. BC's top combined marginal rate is 53.50%. If you drive for business in Metro Vancouver, the Fraser Valley, or the BC Interior, keep in mind that BC has no provincial sales tax on fuel (fuel is subject to federal carbon tax and TransLink/BC Transit taxes in some regions), which may affect your actual-expenses calculation if you use that method instead of the per-km rate.
Alberta Mileage Rate 2026
The Alberta mileage rate for 2026 is the federal CRA rate: 73¢/km for the first 5,000 km, 67¢/km after. Alberta does not set a separate rate. Alberta's top combined marginal rate is 48%, the lowest among major provinces, so each dollar of mileage deduction saves slightly less in Alberta than in Ontario or BC. Alberta also has no provincial sales tax (PST), which can make the per-km simplified method more advantageous than the actual-expenses method compared to provinces with HST — since there's no PST on fuel and maintenance to claim back as ITCs.
How to Calculate the CRA 2026 Allowance for Multi-Province Drivers
Drivers who cross provincial or territorial borders for business — long-haul sales reps, regional consultants, couriers, contractors working on cross-border projects — sometimes ask whether they should pro-rate the per-kilometre rate by province. The answer is no. The CRA per-kilometre rate is set federally and applies uniformly across all 10 provinces. It does not matter where you drove the kilometres — Ontario, BC, Alberta, Quebec, the Maritimes — they all use the same 73¢/67¢ tier structure for 2026.
The only exception is the territorial rate. If you live in or operate primarily out of the Yukon, Northwest Territories, or Nunavut, all of your business kilometres for the year qualify for the territorial rate of 77¢/km for the first 5,000 km and 71¢/km after. The territorial bonus applies based on the location of your employment or business — not the location where each kilometre was driven. A Yellowknife-based contractor who drives 2,000 km in Alberta during a project still gets the full territorial rate on those kilometres.
For employees who split time between a province and a territory, the CRA generally treats the rate as following your principal place of work. If you're seconded to a Yukon project for several months, the territorial rate applies to kilometres driven during the secondment. Check with your payroll team — most employers use a single rate for the year based on where you spent the majority of the work period.
The 5,000 km tier threshold is annual and cumulative across all provinces. You don't get a fresh 5,000 km allowance every time you cross a border; once your year-to-date business kilometres pass 5,000, every additional kilometre — whether driven in Toronto, Calgary, or Halifax — drops to the 67¢ rate. Keep your logbook running totals province-by-province if your employer or accountant wants the breakdown, but the rate itself is single-tier nationwide.
CRA Reasonable Allowance vs Tax-Free Reimbursement Rules
Whether a car allowance is tax-free or taxable to the employee depends on whether it qualifies as a "reasonable allowance" under the CRA's rules. There are three distinct categories, and only one of them is tax-free:
- Reasonable per-kilometre allowance (tax-free) — the employer pays a per-km rate at or below the CRA reasonable rate (73¢/67¢ for 2026 in the provinces, 77¢/71¢ in the territories), the rate is based solely on business kilometres actually driven, and the employee keeps a logbook substantiating the kilometres. This allowance does not appear on the T4 and is not taxable employment income.
- Allowance above the CRA rate (partially taxable) — if the employer reimburses above 73¢/67¢ per kilometre, the portion at or below the CRA rate remains tax-free, and the excess is reported on the T4 as taxable employment income. Some employers in competitive fields pay 80¢ or 90¢/km to attract drivers; the extra 10–20¢ above the CRA reasonable rate is taxable.
- Flat car allowance (fully taxable) — a fixed monthly payment (e.g. $500/month regardless of kilometres) is treated as additional salary because it isn't tied to actual business use. It's reported in Box 14 of the T4 and subject to income tax, CPP, and EI like any other wage. Many employers use flat allowances because they're administratively simpler — but the cost to the employee is meaningful, especially in higher tax brackets.
If you receive a flat allowance and you're self-employed (or have a side business that uses the same vehicle), you may still be able to deduct vehicle expenses on T2125 — but you have to include the flat allowance as income first, and your business-use percentage from your logbook still governs the deduction. The simpler path for most employees is to push your employer toward a reasonable per-km allowance with a logbook, since both sides come out ahead on tax.
For self-employed taxpayers, the reasonable-allowance rules don't apply — you deduct the business-use percentage of actual vehicle expenses on T2125 Part 7, and the CRA reasonable rate is only relevant if you also pay yourself a per-km allowance from a corporation. See the T2125 expense tracker guide for the full self-employed workflow.