CRA Mileage Rate 2026: Per-Kilometre Rates and Who Can Use Them

For 2026 the CRA per-kilometre allowance rate is 73 cents for the first 5,000 business kilometres and 67 cents for each kilometre after that, up one cent from 2025. In the territories (Yukon, Northwest Territories, Nunavut) the rate is 4 cents higher: 77 cents and 71 cents. But there is a catch most "CRA mileage rate" articles skip: this rate is the tax-free allowance an employer pays an employee. If you are self-employed, you cannot deduct cents per kilometre at all.

This guide gives the full 2026 rate table, the who-can-actually-use-it rule, and the other automobile limits that changed with it, so you know which number applies to your situation before you file.

What the CRA "mileage rate" actually is

The number people search for as the "CRA mileage rate" is the reasonable per-kilometre allowance rate. It is the amount an employer can pay an employee, tax-free, for using their own vehicle on the job. The prescribed rates come from section 7306 of the Income Tax Regulations, and the Department of Finance updates them each January.

The 2026 rates took effect on 1 January 2026. Two things follow from that. An employee who drives for work can receive up to this rate without it counting as income. And an employer, including an incorporated business paying its owner-manager, can deduct the allowance as a business expense up to the same limit.

What the rate is not: it is not a deduction a sole proprietor claims on a per-trip basis. More on that below, because it is where most people get the CRA rules wrong.

CRA automobile allowance rates: 2026 and prior years

Here are the reasonable per-kilometre allowance rates set by the Department of Finance, in cents per kilometre, for the provinces:

The territories add 4 cents per kilometre to both tiers to reflect higher driving costs. For 2026 that means 77 cents for the first 5,000 kilometres and 71 cents after, confirmed in the 2026 announcement.

A worked example: an employee based in Ontario drives 7,000 business kilometres in 2026. The tax-free allowance ceiling is 5,000 × 73¢ + 2,000 × 67¢, which is $3,650 + $1,340 = $4,990. Anything the employer pays above that reasonable amount becomes a taxable benefit on the employee's T4.

Who can use the per-kilometre rate, and who can't

This is the distinction that decides which rule applies to you.

Employees who receive an allowance. If your employer pays you a per-kilometre allowance for business driving, the rate above is the tax-free ceiling. You do not report the allowance as income and you do not deduct vehicle costs separately for the same driving.

Employers and corporations. A business deducts the allowance it pays as an expense, capped at the reasonable rate. An owner-manager of an incorporated business is an employee of that corporation, so the corporation can reimburse them at the per-kilometre rate.

Self-employed sole proprietors and partners. Here is the part the rate tables leave out. If you are self-employed, the CRA does not let you deduct a per-kilometre amount. You deduct your actual vehicle expenses, fuel, insurance, maintenance, licence, lease or loan interest, and capital cost allowance, multiplied by your business-use percentage. That percentage is your business kilometres divided by total kilometres for the year.

So if you drove 20,000 kilometres in 2026 and 12,000 were for business, your business-use percentage is 60%, and you deduct 60% of each actual cost. The 73-cent rate never enters the calculation. Our guide to vehicle expenses and the CRA walks through the eligible costs and the log book rules, and self-employed tax deductions in Canada covers where they land on Form T2125.

Why does this trip people up? Because the per-kilometre rate is easy to find and easy to multiply, and plenty of blogs present it as "the mileage deduction". For a sole proprietor, using it produces a number the CRA will not accept.

When an allowance is reasonable, and when it becomes taxable

For employees and the employers who pay them, the rate is only half the rule. The allowance also has to be structured correctly, or the CRA treats the whole thing as taxable income.

An allowance is reasonable and tax-free only when it is based solely on the number of business kilometres driven, and the employee is not also reimbursed for the same vehicle use. Three structures fail that test:

• A flat monthly car allowance. A fixed $500-a-month payment is not based on kilometres, so the CRA counts it as taxable income, even if the driving would have justified it.
• A per-kilometre rate the CRA considers too high or too low. If the rate does not reasonably reflect the cost of driving, the allowance can be treated as unreasonable.
• A flat allowance plus a per-kilometre top-up for the same driving. You cannot average a lump-sum allowance over the year to back into a per-kilometre figure and call it reasonable. Paying both for the same use makes both taxable.

The practical version: pay (or receive) a straight per-kilometre allowance at or below the prescribed rate, tied to a kilometre log, and keep the two roles separate, an allowance or a reimbursement, not both for the same trips.

The other 2026 automobile limits that changed with the rate

The same Finance Canada announcement that sets the allowance rate also sets the deduction ceilings that self-employed people and corporations actually use. For 2026:

All figures are from the 2026 announcement and apply to vehicles bought or leases and loans entered into on or after 1 January 2026. The CCA ceiling caps the cost you can depreciate: buy a $55,000 gas car for the business and you still depreciate only $39,000 of it. The operating-expense benefit rate (34¢) is a separate figure used to value the taxable benefit when a corporation pays the running costs of a car an employee uses personally, not something a sole proprietor claims.

How to keep a log the CRA will accept

Whether you deduct actual expenses as a sole proprietor or receive a per-kilometre allowance as an employee, the record is the same, and it is the first thing the CRA asks for. Your motor-vehicle records must show, for each business trip:

• the date
• the destination
• the business purpose
• the number of kilometres driven

You also record the odometer reading at the start and end of the fiscal year to establish total kilometres. Once you have kept a full logbook for one complete base year, you can switch to a three-month sample period in later years, as long as your business use stays within 10 percentage points of the base year.

The expenses behind the percentage need evidence too. A log proves your business-use share; receipts prove what you spent. Fuel and parking slips print on thermal paper that fades within months, so capture them at the pump. An AI receipt scanner reads the vendor, date, amount, and GST/HST off each slip in seconds and files it digitally, and an expense tracker keeps the running total you apply your business-use percentage to at year end. SparkReceipt also has a mileage tracker for logging trips, though you set your own rate and the CRA figures above are the ones to enter. Get Started if you want your receipts and kilometres in one place before filing.

Frequently asked questions

Is the 2026 CRA mileage rate higher than 2025?

Yes, by one cent. The provincial rate rose from 72¢ to 73¢ for the first 5,000 kilometres and from 66¢ to 67¢ after, effective 1 January 2026. The territories rate rose the same one cent to 77¢ and 71¢.

Can a self-employed person deduct 73 cents per kilometre?

No. A sole proprietor or partner deducts actual vehicle expenses times their business-use percentage, not a per-kilometre amount. The 73-cent rate is the tax-free allowance an employer pays an employee. Using cents per kilometre on Form T2125 produces a figure the CRA will not accept.

What about an owner of an incorporated business?

An owner-manager is an employee of their corporation. The corporation can reimburse them at the reasonable per-kilometre rate, deduct it as an expense, and the owner receives it tax-free, provided it is based only on business kilometres and backed by a log.

Is the "mileage rate" the same as the simplified travel rate for medical or moving expenses?

No. The simplified per-kilometre rate for medical, moving, and northern-residents travel is a separate figure the CRA sets by province for those specific deductions. Don't use it for business driving, and don't use the business allowance rate for a medical-travel claim.

Do I still need a log if my employer pays me an allowance?

Yes. The allowance is only tax-free if it is based on business kilometres, and the CRA can ask either you or your employer to substantiate the count. A kilometre log is the evidence that keeps the allowance non-taxable.

Key takeaways

• The 2026 CRA per-kilometre allowance rate is 73¢ for the first 5,000 business kilometres and 67¢ after, up one cent from 2025; the territories add 4¢, giving 77¢ and 71¢.
• The rate is the tax-free allowance an employer pays an employee, not a deduction a sole proprietor claims.
• Self-employed people deduct actual expenses times their business-use percentage on Form T2125; the per-kilometre rate never enters that math.
• An allowance is only tax-free when it is based solely on business kilometres. A flat monthly car allowance is taxable, and you cannot pay both a flat allowance and a per-kilometre rate for the same driving.
• The 2026 CCA ceiling for a passenger vehicle rose to $39,000; the leasing ($1,100/month), interest ($350/month), and operating-benefit (34¢/km) limits held from 2025.
• Every method needs the same record: a kilometre log with date, destination, purpose, and distance, plus receipts for the costs behind the percentage.