CRA mileage rate for 2026: the per-kilometre allowance rates

CRA mileage rate 2026: the rates at a glance

For 2026, the CRA’s prescribed per-kilometre rates are 73 cents for the first 5,000 kilometres driven and 67 cents for each kilometre after that. In the territories the rates are 77 cents and 71 cents. The Department of Finance announced the change on January 14, 2026, and it took effect on January 1, 2026. Each rate rose by one cent from 2025, when the figures were 72 and 66 cents (76 and 70 cents in the territories).

These are the CRA kilometre rates employers use for allowances. They are a ceiling for the amount an employer can deduct, and the CRA generally treats an allowance based on them as reasonable. They are not a rate that a self-employed person can simply multiply by their kilometres to get a deduction, which is covered further down.

As of October 24, 2026, the CRA has not published rates for 2027. Rates are announced for a calendar year, so do not assume the 2027 figures will match these. Check the CRA page again when the new rates are announced.

How employers use the CRA kilometre rate

An employer can pay an employee an allowance for using their own vehicle on work duties. If the allowance is not taxable, the employer does not add it to the employee’s T4 income and does not withhold income tax, CPP or EI on it. The CRA sets out conditions for that treatment, and all of them have to be met.

First, the allowance must be based only on the kilometres the employee drove for work. Second, the per-kilometre rate must be reasonable. Third, you must not also reimburse the same use of the vehicle. Reimbursing supplementary business insurance, or tolls and ferry charges, is an exception when the allowance was set without including them.

A simple illustration, with round numbers: an employee drives 8,000 work kilometres in a year in Ontario. At the prescribed rates that is 5,000 km at 73 cents, which is $3,650, plus 3,000 km at 67 cents, which is $2,010, for a total of $5,660. This is an example only, not a figure for any real employee.

What counts as business driving

Business driving is generally travel between work locations for employment duties, including trips to a point of call such as a client’s premises. Travel between home and a regular place of employment is personal driving, even if you ask the employee to take the vehicle home. The CRA says that if there is no business driving at all, the allowance is taxable.

Ask employees to keep records. The CRA looks for receipts, a log of all kilometres driven for work during the year, and a log of each work trip with its date, destination and purpose. If no record is kept, the allowance is generally taxable. Keep a copy of what the employee gives you.

When a mileage allowance becomes taxable

A flat monthly amount is taxable because it is not tied to kilometres driven. So is a per-kilometre rate that is not considered reasonable, whether it is set too high or too low. A flat per-diem combined with a per-kilometre rate for the same use of the vehicle is treated as one allowance, and the whole amount is taxable. You also cannot average flat allowances at year-end to turn them into a reasonable per-kilometre rate.

If you use a rate other than the prescribed one, the CRA says the facts matter, such as the type of vehicle, driving conditions or local fuel costs. Be ready to explain why the different rate is reasonable.

If you pay advances, the CRA describes a method that may keep them non-taxable. You set a per-kilometre rate at the start of the year, record it in the employee’s file, and the employee accounts for their kilometres by December 31 or their last day of employment, whichever is earlier. You then compare kilometres times the rate with what you advanced and settle the difference between you and the employee. When an allowance is taxable, it goes on the T4 and the usual deductions apply.

Self-employed: actual vehicle expenses and a logbook

The per-kilometre allowance is a payroll rule. A self-employed person deducts the actual costs of running the vehicle for the business instead. The CRA’s motor vehicle page lists claimable costs such as fuel, insurance, licence and registration, maintenance and repairs, leasing costs and interest on a vehicle loan, plus capital cost allowance. Passenger vehicles are subject to limits on capital cost allowance, interest and leasing costs. The page does not describe a per-kilometre method for the self-employed, so ask your accountant before using the allowance rate as a shortcut.

You deduct only the business share. Illustration: if you drove 12,000 of 20,000 total kilometres for business, that is 60 percent. With $10,000 of eligible vehicle costs, the claim is $6,000 before any limits that apply to your vehicle. Parking fees and supplementary business insurance are deductible in full, according to the CRA page.

A logbook is the support for that percentage. For each business trip, record the date, destination, purpose and kilometres, and note the odometer reading at the start and end of the fiscal period. The CRA also describes a simplified approach: keep a full logbook for one year as a base year, then a three-month sample in later years, as long as the result stays within 10 percent of the base year. Keep the base-year logbook along with your other records.

Which one applies to you

If you pay employees to use their own vehicles, the prescribed rates, the kilometre log and the conditions above are your tools. If you are the owner and work for yourself, your records and the actual-expense method are. If you are an incorporated owner paid by your own corporation, ask your accountant which approach fits before the year-end rather than after.

For the self-employed side in more detail, see our article on vehicle expenses and logbook rules. The accounting encyclopedia entries on capital cost allowance and taxable benefit cover two terms used above.