CRA Mileage Rate 2026: Per-KM Rates & Rules

CRA Mileage Rate 2026: Official Figures

The Canada Revenue Agency publishes two tiers of per-kilometre rates each year. These are the official 2026 automobile allowance rates, effective January 1, 2026:

The territorial supplement of $0.04/km reflects higher fuel costs, longer distances, and limited access to vehicle maintenance in the North.

These are the automobile allowance rates for business driving. Driving to appointments is a separate claim under the medical expense tax credit, and it uses its own province-by-province per-kilometre amounts rather than the figures above — the rules and distance thresholds are set out in our guide to the medical travel mileage deduction in Canada.

What Changed from 2025 to 2026?

Both tiers increased by one cent per kilometre. Here is the year-over-year comparison:

The one-cent increase is modest, but it compounds across thousands of business kilometres. A driver logging 15,000 business km per year gains an extra $150 in tax-free allowance compared to 2025.

How the 5,000 km Threshold Works

The CRA per km rate 2026 uses a two-tier structure. You receive the higher rate on your first 5,000 business kilometres each calendar year. Every kilometre after that falls to the lower rate. The threshold resets on January 1.

Example — 8,000 business km in Ontario:

• First 5,000 km at $0.73 = $3,650
• Remaining 3,000 km at $0.67 = $2,010
• Total allowance: $5,660

Example — 4,000 business km in Alberta:

• 4,000 km at $0.73 = $2,920
• All kilometres fall under the first tier

Example — 12,000 business km in Yukon:

• First 5,000 km at $0.77 = $3,850
• Remaining 7,000 km at $0.71 = $4,970
• Total allowance: $8,820

These calculations show a tax-free employer allowance. They are not a deduction you can claim yourself: employees and the self-employed deduct actual costs instead.

Employees vs. Self-Employed: How to Claim

The automobile allowance rate 2026 affects employees and self-employed individuals differently. Understanding which rules apply to you is critical for filing correctly.

Employees

If you use your personal vehicle for work, your employer may pay you a per-kilometre allowance. When that allowance matches the CRA kilometre rate, it is tax-free and does not appear as income on your T4 slip.

To claim vehicle expenses yourself as an employee, you need:

• A signed T2200 (Declaration of Conditions of Employment) from your employer
• Form T777 (Statement of Employment Expenses) filed with your T1 return
• A complete mileage log showing every business trip

How an allowance is taxed depends on whether it is reasonable, not on where it sits against 73¢:

• Reasonable per-km allowance (based only on business kilometres, at a reasonable rate): not taxable and not on your T4. You then generally cannot also deduct your vehicle expenses.
• Allowance that is not reasonable (a flat amount, or a per-km rate that is too low or too high to be reasonable): the whole allowance is taxable income. The CRA does not split it into a tax-free part and a taxable excess. Only in this case can you claim your actual vehicle expenses on the T777, with a signed T2200.

Flat monthly car allowances, lump sums and per-diems follow different tests again — when a travel allowance is taxable in Canada works through what makes an allowance reasonable in the CRA’s eyes and when it has to be added to your T4.

Self-Employed Individuals

Self-employed taxpayers cannot simply multiply their kilometres by the CRA per-km rate. Instead, you must track your actual vehicle expenses — fuel, insurance, maintenance, repairs, licence and registration, interest on a car loan, lease payments, and capital cost allowance — then apply your business-use percentage.

You report these expenses in Chart A of Form T2125 (Statement of Business or Professional Activities), which carries the total to line 9281. The per-km rate plays no part in your own deduction: it only sets the tax-free limit for allowances an employer pays.

Example: You spent $14,000 in total vehicle costs in 2026 and drove 65% for business. Your deduction is $14,000 x 65% = $9,100.

For a complete walkthrough of self-employed deductions, see our guide to self-employed vehicle expenses in Canada.

The Simplified Logbook Method

The CRA offers a simplified logbook method that reduces record-keeping after your first full year of tracking. Here is how it works:

1. Base year: Maintain a complete logbook for one full 12-month period, recording every business trip with date, destination, purpose, and odometer readings.
2. Sample year: In subsequent years, keep a detailed log for any three consecutive months.
3. Calculate: Use the formula — (sample period % / base year same-period %) x base year annual % = your calculated business-use percentage for the year.
4. Apply: Multiply your annual vehicle expenses by that calculated percentage.

The method is valid as long as your calculated business-use percentage stays within 10 percentage points of your base year. If your driving pattern changes substantially — new job, new city, major new client — you must establish a new base year.

Even with the simplified method, you still need January 1 and December 31 odometer readings each year. Tripbook records these automatically, so you never miss a reading.

For full details on qualification rules and examples, read our CRA simplified logbook method guide.

Records the CRA Requires

Whether you use the CRA mileage rate for reimbursement or claim actual expenses, the CRA expects specific documentation for every business trip:

• Date of the trip
• Destination (client name or address)
• Business purpose (meeting, delivery, site visit, etc.)
• Odometer reading at start and end of trip
• Annual odometer readings on January 1 and December 31

You must also keep receipts for all vehicle expenses if you use the actual-expense method. The CRA can request these records for six years after the tax year, so a trip you drove in January 2026 must be on file until at least 2032.

Reconstructing a logbook from memory months later is unreliable and will not hold up in an audit. The safest approach is to log trips as they happen. Tripbook captures the date, route, distance, and purpose of every trip automatically using GPS — building a CRA-compliant log in the background while you drive.

Other 2026 Automobile Deduction Limits

The CRA mileage rate is one piece of a larger framework. Here are the other key automobile limits for 2026:

These caps apply regardless of what you actually paid. For example, if you bought a $55,000 sedan, your CCA is calculated on $39,000, not $55,000. For a deeper look at how capital cost allowance works, see our guide to capital cost allowance on vehicles in Canada.

Common Mistakes That Trigger CRA Audits

Using the per-km rate when you are self-employed. Self-employed taxpayers must use the actual-expense method. Claiming a flat per-km deduction on your T2125 is incorrect and will be reassessed.

Forgetting year-end odometer readings. Without a December 31 reading, you cannot prove your total annual kilometres or your business-use percentage.

Claiming your commute. Driving from home to your regular place of business is personal travel. Only trips beyond your ordinary commute qualify as business kilometres.

Inflating distances. CRA auditors cross-reference logbook totals with odometer evidence. Rounded-up or estimated entries are a red flag.

Mixing calendar years. A trip driven on December 30 must be logged in 2026, not pushed into January 2027. The CRA rate and threshold reset each calendar year.

Start Tracking Every Kilometre Now

The CRA mileage rate 2026 lets your employer pay up to $0.73 per kilometre tax-free, and if you are self-employed your actual-cost deduction depends on your business-use percentage. Either way, it only holds up with records of your business driving: every trip you forget to log is money you cannot claim.

Download Tripbook and start building a complete mileage log today. Automatic GPS tracking means no manual entries, no forgotten trips, and a complete record ready for tax season or a CRA audit.