Do I need to keep a logbook to deduct vehicle expenses?

Yes — CRA requires a logbook to substantiate any motor vehicle expense claim. The logbook must record each work trip with the date, destination, purpose, and kilometres driven. You also need to track total kilometres driven in the year (all purposes) to calculate your business-use percentage. Without a logbook, CRA will deny vehicle expense claims on audit.

Can I deduct my car if my employer reimburses me for mileage?

If your employer pays you a reasonable per-kilometre allowance (the 2026 CRA rate is $0.72/km for the first 5,000 km and $0.66/km after), that allowance is not taxable and you cannot also deduct vehicle expenses. If your employer pays a flat vehicle allowance (not kilometre-based), it is added to your income and you may be able to claim actual vehicle expenses as an offset — but you need a T2200.

What is the CRA mileage rate for 2026?

For 2026, the CRA prescribed automobile deduction limit is $0.72 per kilometre for the first 5,000 kilometres of employment-related driving, and $0.66/km after that (per vehicle). In the Yukon, NWT, and Nunavut, the rates are $0.76 and $0.70 respectively.

Can I deduct a leased vehicle for work in Canada?

Yes. Lease costs for a vehicle used for employment or business are deductible in proportion to the business-use percentage. However, the deductible lease cost is subject to a leasing cost limit — for 2026, the maximum monthly lease cost you can deduct is $1,050 per month (before HST/GST). Amounts above this cap are not deductible.

What is capital cost allowance (CCA) for a vehicle?

CCA is the tax deduction for the depreciation of a vehicle you own and use for business. Passenger vehicles fall into CCA Class 10 (30% declining balance) or Class 10.1 (30%, for vehicles costing over the prescribed limit of $37,000 for 2026). Only the business-use portion of annual CCA is deductible. Class 10.1 vehicles are limited in how much you can deduct in the year of acquisition (half-year rule).

Can I Deduct My Car for Work in Canada?

Motor vehicle expenses are one of the most significant — and most audited — deductions in Canada. Whether you are an employee who drives for client visits or a self-employed contractor using your personal vehicle, the rules are clear but strict. Here is exactly what you can deduct and how.

Two sets of rules: employees vs. self-employed

The core calculation is the same, but employees have more restrictions on what qualifies and must have a T2200 from their employer.

	Employees	Self-Employed
Requires T2200?	Yes	No
Can deduct CCA?	Yes	Yes
Can deduct parking at home?	No	Yes (if home is principal place of business)
Can deduct commuting to work?	No	N/A
Claimed on	T777 → Line 22900	T2125 → Net business income

Step 1: Track your kilometres with a logbook

A logbook is mandatory. CRA can deny your entire vehicle claim without one.

Each entry must include:

Date of the trip
Destination
Business purpose
Kilometres driven

At year-end, record:

Total business kilometres
Total kilometres driven for all purposes

Business-use percentage = Business km ÷ Total km × 100

Example: 12,000 business km ÷ 20,000 total km = 60% business use

Can I use a simplified logbook?

Yes — CRA allows an optionally simplified approach after you have kept a full logbook for one base year. In subsequent years, you can keep a sample logbook for a portion of the year and use statistical methods to project the business-use rate — but only if your driving patterns have not changed significantly.

What does NOT count as business kilometres?

Driving from home to your regular place of work (commuting) — never deductible for employees
Personal errands
Driving for a side business on a vehicle mostly used personally (still deductible proportionally)

Step 2: Calculate eligible vehicle expenses

Operating expenses you can deduct (proportionally):

Fuel / gas
Oil changes, maintenance, and repairs
Insurance
Licensing and registration fees
Lease payments (subject to the $1,050/month cap for 2026)
Interest on a vehicle loan (subject to the $350/month cap for 2026)
Car washes (if business use requires a clean vehicle)
Parking — at client locations or temporary work sites (not at your employer’s office)

Operating expenses you cannot deduct:

Capital cost of the vehicle (that is handled through CCA separately)
Traffic fines
Parking at your own workplace (for employees)

Calculation example:

Expense	Annual Amount	Business Use (60%)	Deductible
Fuel	$4,200	60%	$2,520
Insurance	$2,400	60%	$1,440
Maintenance	$800	60%	$480
Registration	$150	60%	$90
Lease ($900/mo × 12)	$10,800	60%	$6,480
Total	$18,350		$11,010

Step 3: Claim capital cost allowance (CCA) if you own the vehicle

If you own the vehicle (rather than lease), you can claim CCA — the annual depreciation deduction.

CCA Classes for passenger vehicles:

Class	Rate	When it applies
Class 10	30% declining balance	Vehicles costing ≤ $37,000 (2026 limit)
Class 10.1	30% declining balance	Vehicles costing > $37,000 — each vehicle is its own class

Year-1 half-year rule: In the year you acquire the vehicle, you can only claim 50% of the full annual CCA.

Example (Class 10 vehicle, year 1):

Purchase price: $30,000
Half-year CCA: $30,000 × 30% × 50% = $4,500
Business use: 60%
Deductible CCA: $4,500 × 60% = $2,700

Important: CCA deducted in prior years reduces the Undepreciated Capital Cost (UCC). When you sell the vehicle, there may be a recapture of CCA (taxable income) or a terminal loss (additional deduction).

Prescribed limits for 2026

These CRA limits cap how much you can deduct on expensive vehicles:

Limit	2026 Amount
Maximum capital cost for Class 10.1	$37,000 (+ HST/GST)
Maximum lease cost deduction	$1,050/month (+ HST/GST)
Maximum interest deduction on vehicle loan	$350/month

These limits exist to prevent deductions on luxury vehicles that have personal benefit beyond what CRA considers reasonable.

How to claim on your tax return

Employees: Complete Form T777 (Statement of Employment Expenses). Attach your signed T2200. Claim on Line 22900 of your T1.

Self-employed: Complete the vehicle section of Form T2125 (Statement of Business or Professional Activities). The deduction flows through to Line 13500 or 13700 net business income.

CRA audit red flags for vehicle claims

Business-use percentage above 80–90% (CRA finds this implausible for most taxpayers)
No logbook or an obviously fabricated one
Claiming a vehicle that is also used by a teenager or non-working family member
Inconsistent mileage across years with no explanation
Commuting distances included in business km

Can I Deduct Home Office Expenses in Canada? — Often claimed together with vehicle expenses
Self-Employed Tax Guide Canada — Full T2125 walkthrough
Can I Deduct Meals on Taxes in Canada? — Another common business expense
Best Mileage Tracking Apps Canada — Automate your logbook