Vehicle Expenses for the Self-Employed in Canada: Logbook, CCA and Limits

This page covers how a sole proprietor deducts the costs of a car, truck or van used in the business: the business-use share and the logbook behind it, what counts as business driving, and the capital cost allowance (CCA) classes and limits for vehicles. It is part of the self-employed taxes hub; the full list of other deductible expenses is on self-employed tax deductions, and how a corporation-owned vehicle differs is on small business tax deductions.

The rule

From chapter 3 of the CRA’s Guide T4002:

In full:

• Only the part of the vehicle expenses paid to earn income is deductible.
• Support the claim with a record of the total kilometres you drive and the kilometres you drive to earn income.
• The expenses must be reasonable and supported by receipts.
• Business parking fees and supplementary business insurance are deductible in full.
• For a passenger vehicle or zero-emission passenger vehicle, there may be limits on the capital cost allowance, interest and leasing costs you can deduct.
• After keeping a full logbook for one base year, you can use a three-month sample logbook in later years if business use stays within 10% of the base year.

The running costs T4002 lists for line 9281 are licence and registration fees, fuel and oil, electricity for zero-emission vehicles, insurance, interest on money borrowed to buy the vehicle, maintenance and repairs, and leasing costs. Capital cost allowance on a vehicle you own goes on line 9936. If you use a vehicle only occasionally for the business, T4002 lets you claim costs per trip (fuel and parking for that trip) instead.

Per-kilometre rates are not a self-employed method. The cents-per-kilometre amounts announced each January are limits on tax-exempt allowances that employers pay employees who drive their own vehicles. A self-employed person deducts actual costs multiplied by the business share.

The logbook and the business-use share

T4002 asks you to record, for each business trip, the date, destination, purpose and number of kilometres, and the odometer reading at the start and end of the fiscal period. If you change vehicles during the year, record the dates and odometer readings when you buy, sell or trade. With more than one vehicle, keep a separate record and calculate expenses separately for each. The business-use share is business kilometres divided by total kilometres.

What counts as business driving

Driving between different places of business, to clients and to work sites is business driving. Driving between your home and your place of business generally isn’t. The CRA’s archived interpretation bulletin on self-employed vehicle expenses, IT-521R (paragraph 24), says that travel between home and place of business is not deductible unless it is established that the home is the base of business operations, and that if you have an office or other fixed place of business elsewhere, home is normally not the base. Its examples of homes that can be the base include a tradesperson who keeps the office and supplies at home, has no other place of business and works at customers’ locations, and a real estate agent with an office only at home who meets clients at their homes or at properties. The home doesn’t need a room set aside only for the business to be the base. Whether your home office also qualifies as a business-use-of-home deduction is a separate test.

Motor vehicle or passenger vehicle

The limits on CCA, interest and leasing apply to passenger vehicles (and zero-emission passenger vehicles), not to every motor vehicle. T4002’s chart classifies vehicles bought or leased for self-employment by seating and business use in the year of purchase or lease:

The chart doesn’t cover every case; the definitions in T4002 decide.

CCA classes and cost ceilings for vehicles

The 2026 ceilings are from the Department of Finance’s January 2026 announcement; the classes and rates are from T4002 chapter 4. Two details from T4002:

• Sales tax is added to the ceiling. Whether a passenger vehicle belongs in Class 10.1 depends on its cost before GST/HST or PST. If it does, its capital cost is the ceiling plus the GST/HST and PST on the ceiling amount, not on the full price. The Class 54 ceiling also applies plus federal and provincial sales taxes.
• Class 55 is not for ordinary cars. It holds zero-emission vehicles that would otherwise be in Class 16 (such as taxis and vehicles used in a daily car rental business), at 40%.
• Class 10.1 and Class 54 work differently. For Class 10.1, T4002 says: “List each Class 10.1 vehicle separately.” Recapture and terminal loss rules don’t apply to Class 10.1 vehicles unless the vehicle was designated immediate expensing property. T4002 also notes that, unlike Class 10.1, Class 54 does not establish a separate class for each vehicle whose cost exceeds the threshold.

First-year CCA. The Budget 2025 Implementation Act, No. 1 (S.C. 2026, c. 3, royal assent March 26, 2026) put the current first-year rules into the Income Tax Regulations; Guide T4002 still describes the newer ones as proposed changes. For Class 10 and 10.1 vehicles:

• Acquired after 2024 (reaccelerated investment incentive property, available for use before 2034): no half-year rule, and if the vehicle becomes available for use before 2030, the capital cost is increased by 1/2 before the class rate is applied.
• Acquired after November 20, 2018 and before 2025 (accelerated investment incentive property, available for use before 2028): in the 2024 to 2027 phase-out period you calculate CCA at the class rate without the half-year rule.

Zero-emission vehicles in Classes 54 and 55 have their own first-year rates (Income Tax Regulations, section 1100). One acquired after 2024 gets 100% if it becomes available for use before 2030, 75% if it becomes available for use in 2030 or 2031, and 55% after that, up to the end of the incentive for vehicles acquired and available for use before 2034. One acquired before 2025 that first becomes available for use after 2025 gets 55%. Small business tax deductions explains these first-year rules.

Interest and lease limits for passenger vehicles

The interest limit is applied per 30 days on Chart B of Form T2125: the available interest for a full year is the lesser of the interest you paid and $350 ÷ 30 × 365 = $4,258. Leasing costs are worked out on Chart C, which compares the monthly limit with a second limit based on the vehicle’s list price and uses the lower amount; GST/HST or PST in the lease payments is included. You then apply your business-use share to the available interest or leasing cost along with the other running costs.

If you own or lease a passenger vehicle jointly, the limits still apply: the total that all owners deduct can’t be more than one person owning or leasing the vehicle could deduct.

Related pages

• Self-employed tax deductions: the T2125 expense checklist
• Business-use-of-home expenses for the self-employed
• How to complete Form T2125
• Small business tax deductions: sole proprietor vs corporation
• Uber driver tax guide