What counts as business driving, the logbook the Canada Revenue Agency expects, which vehicle costs you can claim with the 2026 limits, and how the rules change when your corporation owns the vehicle or pays you per kilometre, with every rule linked to the CRA.
You can deduct only the business share of a vehicle’s costs: business kilometres divided by total kilometres. Driving between your home and your regular place of work is personal, unless your home is the base of your business. The CRA’s best evidence is a logbook for the whole year with the date, destination, purpose and kilometres of each business trip, plus the odometer at the start and end of the year. After one full base year, a three-month sample logbook can do, if the result stays within 10% of the base year. Sole proprietors claim actual costs and CCA on Form T2125. If your corporation owns the vehicle, your personal driving is a taxable benefit. If you own it and the corporation pays you a reasonable rate per business kilometre (73 cents for the first 5,000 km in the provinces in 2026), the allowance is not taxable to you.
What Counts as Business Driving?
Only the business share counts. The CRA’s motor vehicle expenses page says that if you use a vehicle for both business and personal driving, you deduct only the part of the costs that relates to earning business income, and you keep a record of the total kilometres you drive and the kilometres you drive to earn income. The business share is business kilometres divided by total kilometres. Plane, train and bus fares, hotels and meals on a business trip are not vehicle costs: they are travel expenses, as our business travel expenses guide explains.
Driving from home to work is usually personal. The CRA’s bulletin on motor vehicle expenses of self-employed individuals (IT-521R, now archived) says travel between different places of the same business is deductible, but travel between your home and your place of business is not, unless your home is the base of your business operations. If you have an office or shop somewhere else, your home is normally not the base. The bulletin’s examples of a home that can be the base: an anaesthetist who does all the office work at home and treats patients only at hospitals, an independent real estate agent whose only office is at home, and a plumber, electrician or painter whose office and supplies are at home and who works at customers’ sites. If your home office is your principal place of business, see home office expenses.
- Business: going to a client’s premises for a meeting, making a repair call, a salesperson visiting customers, and errands for the business such as picking up supplies.
- Business: travel between two places of the same business.
- Personal: driving from home to your office or shop when it is somewhere else, vacation trips and personal errands.
The first and last points are from the CRA’s vehicle allowance page for employees, which follows the same idea; the second is from IT-521R.
What Logbook Does the CRA Expect?
The CRA’s motor vehicle expenses page says the best evidence of business use is an accurate logbook of business travel kept for the entire year. For each business trip, record:
- the date,
- the destination,
- the purpose, and
- the number of kilometres driven.
Also record the odometer reading at the start and end of your fiscal period. If you change vehicles during the year, record the dates and the odometer readings when you buy, sell or trade. If the business uses more than one vehicle, keep a separate record for each and work out each vehicle’s costs separately.
The simplified logbook. Once you have kept a full logbook for one complete year (the base year), you can keep a logbook for a three-month sample period in a later year. The business use for that year is the sample period’s business use, divided by the base year’s business use for the same three months, multiplied by the base year’s annual business use. This works only while the result stays within 10% of the base year, and you must be able to show the base year still reflects your normal use. If the result moves by more than 10%, the sample counts only for its three months, and the CRA suggests starting a new 12-month base year.
Both are from the CRA’s motor vehicle expenses page: the first shows the business share, the second the simplified logbook.
90% business, $6,300 claimed
- Murray drove his truck 27,000 km for the business out of 30,000 km in the year
- Fuel and oil $3,500, repairs $500, insurance $1,000, loan interest $1,900 and licence $100: $7,000
- 27,000 ÷ 30,000 × $7,000 = $6,300 on his Form T2125
54% business use
- Base year logbook: 49% business use for the year, 46% for April to June
- Later year, sample logbook for April to June: 51%
- (51% ÷ 46%) × 49% = 54%, accepted because it is between 39% and 59%
What Vehicle Costs Can You Claim?
The CRA’s motor vehicle expenses page and Guide T4002 list the costs you claim on line 9281 of Form T2125 (Chart A), with capital cost allowance (CCA) on line 9936. The 2026 limits are from the Department of Finance’s 2026 automobile limits announcement and apply to passenger vehicles:
| Vehicle cost | What you can deduct |
|---|---|
| Fuel and oil, or electricity for a zero-emission vehicle | Business share |
| Insurance | Business share; supplementary business insurance in full |
| Maintenance and repairs | Business share |
| Licence and registration fees | Business share |
| Parking for business | In full |
| Interest on a vehicle loan | Business share; for a passenger vehicle, new loans in 2026 are capped at $350 a month |
| Lease payments | Business share; for a passenger vehicle, new leases in 2026 are capped at $1,100 a month before tax |
| Buying the vehicle (CCA) | Class 10 at 30%; a passenger vehicle bought in 2026 for more than $39,000 before tax goes in Class 10.1, with its cost capped at $39,000 plus tax |
| Zero-emission passenger vehicle | Class 54, with its cost capped at $61,000 before tax |
A passenger vehicle is one designed mainly to carry people that seats the driver and no more than eight passengers: most cars, station wagons and vans, and some pickup trucks. In the year you buy or lease it, a van or pickup that seats no more than the driver and two passengers and is used more than 50% to carry goods or equipment, or any van or pickup used 90% or more to carry goods, equipment or passengers for the business, is a motor vehicle instead, and the caps above do not apply. The class depends on the cost before GST/HST and PST (T4002, Chapter 4). For how CCA and the half-year rule work, see buying equipment before December 31.
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Does It Matter Who Owns the Vehicle?
Yes. A sole proprietor’s vehicle costs go on the business statement. A corporation is a separate taxpayer: if it owns or leases the vehicle, the CRA treats your personal use of it as a benefit to you, and if you own the vehicle, the corporation can pay you for the business kilometres you drive for it. IT-521R also says a self-employed claim worked out on a cents-per-kilometre basis is not acceptable, so the per-kilometre rate is for the corporate route only.
You claim on Form T2125
- The business share of your actual costs, in Chart A
- Plus CCA on the business share
- Not a flat rate per kilometre
The corporation owns or leases it
- Your personal driving is a taxable benefit
- A standby charge, plus an operating benefit if it pays the running costs
- Reported on your T4, or a T4A as a shareholder
You own it, the corporation pays per km
- A reasonable rate for business kilometres only
- 73 cents for the first 5,000 km in 2026, then 67 cents
- Not taxable to you, with your log on file
How Do the Standby Charge and the Per-Kilometre Allowance Work?
The corporation owns or leases the vehicle. The CRA’s page on automobiles provided by the employer says the rules also cover a shareholder or a person related to a shareholder. The standby charge is 2% of the vehicle’s original cost (including options, GST/HST and PST) for each 30 days it is available to you, or two-thirds of the lease cost if the corporation leases it. It can be reduced if all of these apply:
- you are required to use the vehicle for your work,
- more than 50% of the kilometres are business driving, and
- personal driving is no more than 1,667 km for each 30 days (20,004 km in a full year).
The reduced charge is the full charge multiplied by your personal kilometres, divided by 1,667 km for each 30-day period. If the corporation also pays the operating costs (fuel, repairs, insurance, licences), there is an operating benefit of 34 cents per personal kilometre for 2026. If more than 50% of your driving is for business, you can instead tell the corporation in writing before the end of the year that you choose half of the standby charge. There is no operating benefit if you repay all the operating costs of your personal driving no later than 45 days after the end of the year. You must keep a logbook or daily record and give the corporation a copy. Guide T4130 says the benefit goes on your T4 if the vehicle is provided to you as an employee, or on a T4A as other income if you are a shareholder who is not an employee.
You own the vehicle and the corporation pays you per kilometre. The CRA’s allowance page says an allowance for using your own vehicle is not taxable if all of these apply: it is based only on business kilometres, the rate is reasonable, and you are not also reimbursed for the same use (supplementary business insurance, tolls and ferry charges are the exceptions). The CRA generally treats the prescribed rates as reasonable. For 2026 they are:
- 73 cents a kilometre for the first 5,000 km, and 67 cents after that, in the provinces,
- 77 cents and 71 cents in the territories.
A flat amount, such as $600 a month whatever you drive, is taxable, and a flat amount paid on top of a per-kilometre rate for the same use makes the whole amount taxable. You must keep detailed records of your business kilometres and give the corporation a copy; if no record is kept, the allowance is generally taxable. The Department of Finance describes these rates as the limit on the deduction of tax-exempt allowances paid by employers. For this purpose, driving from home to your regular place of work is personal, while driving from home to a client’s premises is business.
What Records Should You Keep?
Keep the logbook with the receipts. The CRA’s motor vehicle expenses page says you can deduct vehicle costs only when they are reasonable and you have receipts to support them. Records are normally kept for six years from the end of the tax year they relate to, but a full 12-month base year logbook must be kept for six years from the end of the last tax year you use it to work out business use. See how long to keep business records.
- Logbook: the date, destination, purpose and kilometres of each business trip.
- Odometer: the readings at the start and end of the year, and when you buy, sell or trade a vehicle.
- Receipts: fuel, repairs, insurance, licence and registration, parking and tolls.
- Buying or leasing: the bill of sale or lease, the loan statement showing the interest, and the CCA class.
- Incorporated owners: your per-kilometre claims and the corporation’s payments, or the days the corporation’s vehicle was available and your personal kilometres.
How Can We Help With Vehicle Expenses?
For sole proprietors, we prepare your personal return with the business statement (Form T2125), including the vehicle chart, the business share and CCA. For incorporated owners, we help you compare the corporation owning the vehicle with a per-kilometre allowance, set up the logbook and claim forms, record the payments in your books and reflect them in the corporation’s T2 return and your slips. Fees are fixed and quoted up front.
If you want your vehicle claim set up before the year ends, see our packages.
Frequently Asked Questions
Is driving from home to my office business driving?
Usually not. The CRA treats travel between your home and your place of business as personal, unless your home is the base of your business operations, for example a tradesperson whose office and supplies are at home and who works at customers’ sites. Driving from your office to a client, or between two places of your business, is business driving.
Can I claim 73 cents a kilometre on my T2125?
No. The 73 and 67 cent rates are for allowances an employer pays an employee for using their own vehicle. The CRA’s bulletin IT-521R (archived) says a self-employed claim worked out on a cents-per-kilometre basis is not acceptable. You claim the business share of your actual costs, plus CCA.
Do I have to keep a logbook every year?
Not a full one. After one complete year of logbook (the base year), you can keep a three-month sample logbook in later years, as long as the result stays within 10% of the base year and the base year still reflects your normal use. Keep the base year logbook for six years after the last year you rely on it.
My pickup is only used for work. Do the passenger vehicle limits apply?
Not if it is a motor vehicle under the CRA’s definitions. A pickup or van that seats the driver and up to two passengers and is used more than 50% to carry goods or equipment in the year you buy it, or any van or pickup used 90% or more to carry goods, equipment or passengers for the business, is not a passenger vehicle, so the $39,000, $350 and $1,100 limits do not apply. You still claim only the business share.
Should my corporation own my vehicle or pay me per kilometre?
It depends on your numbers. When the corporation owns the vehicle, your personal use creates a standby charge based on the vehicle’s cost for every 30 days it is available, reduced only when more than 50% of the driving is for business. When you own it, a reasonable per-kilometre allowance for business kilometres is not taxable to you. Compare both with your own kilometres and costs before you buy.
Reviewed on 30 October 2026. Business driving rules, logbook rules, expense lists, limits, rates and examples in this article are from the Canada Revenue Agency and the Department of Finance Canada, linked beside each fact and listed below.
T1 Personal Tax
Personal tax returns, including the business statement and vehicle claim for self-employed Canadians
T2 Corporate Tax
Corporate tax returns for Canadian corporations, with proactive tax planning and vehicle costs handled the right way
Sources
- Canada Revenue Agency, Motor vehicle expenses (self-employed) (page dated 2026-08-17, checked 30 October 2026)
- Canada Revenue Agency, Guide T4002, Chapter 3, Expenses (page dated 2026-04-16, checked 30 October 2026)
- Canada Revenue Agency, Guide T4002, Chapter 4, Capital cost allowance (page dated 2026-04-16, checked 30 October 2026)
- Canada Revenue Agency, Interpretation Bulletin IT-521R, Motor Vehicle Expenses Claimed by Self-Employed Individuals (archived) (page dated 2017-06-22, checked 30 October 2026)
- Department of Finance Canada, Government Announces the 2026 Automobile Deduction Limits and Expense Benefit Rates for Businesses (14 January 2026, checked 30 October 2026)
- Canada Revenue Agency, Allowances or reimbursements provided to an employee for the use of their own vehicle (page dated 2026-03-06, checked 30 October 2026)
- Canada Revenue Agency, Automobile provided by the employer (page dated 2026-03-06, checked 30 October 2026)
- Canada Revenue Agency, Guide T4130, Employers’ Guide, Taxable Benefits and Allowances (page dated 2026-08-17, checked 30 October 2026)
