Employees and owner-managers often use their personal vehicles for client meetings, deliveries, banking and other business travel.
For 2026, the CRA’s prescribed provincial rates are:
✅ 73¢ per kilometre for the first 5,000 business kilometres
✅ 67¢ per kilometre for each additional business kilometre
The territorial rates are 77¢ and 71¢, respectively. Canada.ca
For example, an Ontario employee who drives 8,000 qualifying business kilometres could receive:
5,000 km × 73¢ = $3,650
3,000 km × 67¢ = $2,010
Total allowance = $5,660
When is the allowance generally non-taxable?
The allowance should:
• Be based only on business kilometres actually driven
• Use a reasonable per-kilometre rate
• Be supported by a kilometre log
• Not duplicate reimbursement for the same vehicle expenses
Separate reimbursement for supplementary business insurance, tolls and ferry charges may still be permitted.
What is not business driving?
Travel between home and the employee’s regular workplace is normally personal commuting.
Travel between workplaces, to a client’s premises or to another qualifying point of call may be business-related, depending on the circumstances.
Watch out for flat monthly allowances
A fixed monthly car allowance is generally taxable because it is not based solely on kilometres driven.
Combining a flat allowance with a per-kilometre payment for the same vehicle use may also cause the entire allowance to be treated as unreasonable and taxable.
Self-employed taxpayers follow different rules
The 73¢ and 67¢ rates do not automatically determine the deduction available to a sole proprietor.
Self-employed individuals generally claim the business-use portion of actual vehicle expenses, including fuel, insurance, repairs, licence fees, eligible interest, leasing costs and capital cost allowance.
A kilometre log is used to establish the business-use percentage. CRA recommends recording the date, destination, business purpose and kilometres for every business trip, together with beginning and ending odometer readings. Canada.ca
Practical takeaway
Keep your vehicle log current throughout the year. Reconstructing business travel at tax time is difficult and may weaken the deduction if CRA reviews it.
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Primary sources: CRA allowance guidance | CRA motor-vehicle expenses
