What vehicle expenses can self-employed people deduct in Canada?

Self-employed Canadians can deduct vehicle expenses on T2125 in proportion to the business use of the vehicle. Eligible expenses include: fuel/gas; insurance; license and registration fees; repairs and maintenance; oil and filter changes; car washes (incidental); parking (business purposes); Capital Cost Allowance (CCA) on the purchase price; interest on a vehicle loan (capped rules for passenger vehicles); lease payments (capped deduction for passenger vehicles). All expenses are multiplied by your business-use percentage (business kilometres ÷ total kilometres driven in the year). A logbook is mandatory — without it, CRA can deny the entire vehicle deduction on audit. The logbook must record every business trip: date, destination, purpose, and odometer reading at start and end of each business trip.

What is required in a CRA vehicle logbook?

CRA requires a logbook recording every business trip in a vehicle you are claiming deductions on. Each entry must include: date of the trip; destination (address or at minimum city and business name); purpose of the trip (what business was conducted); odometer reading at the beginning and end of each business trip. At year-end, record the total kilometres driven for the year (total odometer at Dec 31 minus Jan 1). Business-use percentage = total business km ÷ total km. CRA also accepts a "representative period" logbook after at least one full year of records — for subsequent years, you keep a 3-month logbook and compare it to the base year; if within 10%, you can use the base-year percentage. Apps like MileIQ, Everlance, or even a paper notebook work for logbook purposes as long as the required details are recorded.

What is the passenger vehicle cost limit for CCA in Canada?

For 2026, the maximum cost of a passenger vehicle eligible for CCA under Class 10.1 is $37,000 (pre-tax). If your passenger vehicle cost more than $37,000, you can only claim CCA on a deemed cost of $37,000 — the excess is not deductible. This applies to Class 10.1 vehicles. Compare to Class 10 (general purpose vehicles like vans, pickup trucks, SUVs not classified as passenger vehicles) — Class 10 has no cost limit. A "passenger vehicle" for this rule is a motor vehicle designed primarily to carry people on highways (sedans, hatchbacks, crossovers, passenger SUVs). Exception: vehicles costing over $37,000 that seat more than 8 passengers (full-size vans, minibuses used for business) may qualify under Class 10 without the limit. The CCA rate for both Class 10 and 10.1 is 30% declining balance, but each Class 10.1 vehicle must be tracked in its own separate CCA schedule.

Should I buy or lease a business vehicle?

From a tax deduction perspective: Buying: you deduct CCA annually (30%, declining balance) on the purchase price up to the CCA limit, plus 100% of interest payments on the loan (for non-passenger vehicles, or capped interest for passenger vehicles — $10/day lease-equivalent cap, $300/month for 2026). Leasing: you deduct the lease payments (monthly payment × business %). But there are caps: for a passenger vehicle lease, the maximum deductible lease payment is $900/month (for 2026) regardless of your actual monthly payment. Cash flow impact also differs: lease = lower monthly payment but no equity; purchase = higher payment but asset on your balance sheet. General guidance: if the vehicle costs under $37,000 and the lease payment is under $900/month, both methods are roughly equivalent in tax terms. If you want to build equity and drive the vehicle long-term, buying is usually better. If cash flow matters and you replace vehicles frequently, leasing may work better for your business.

Can I deduct commuting kilometres?

No. Driving from your home to a regular fixed place of business (a client's office where you work every day, a rented office, or any other fixed regular place of work) is commuting — it is not a deductible business trip. Business travel means driving from one business location to another, to a client site, to pick up business supplies, to meet prospects, to attend business events, etc. For home-based self-employed workers who have no fixed external place of business, driving from home to a client's office is a business trip (your home is your principal place of business). This is one practical benefit of having a legitimate home office — it converts what would be a non-deductible commute into a deductible business trip.

Vehicle Expenses Self-Employed Canada 2026 — CRA Logbook, CCA, and Deduction Rules

Logbook Requirements — What CRA Expects

Field Required	Example Entry
Date	March 15, 2026
Destination	123 Client St, Toronto, ON
Business purpose	Project kick-off meeting with ABC Corp
Odometer at start of trip	47,832 km
Odometer at end of trip	47,901 km
Trip km	69 km

Record every business trip. Record total annual odometer (Jan 1 and Dec 31). Calculate business-use% = total business km ÷ total km driven.

Business-Use Percentage — Example Calculation

Item	Kilometres
Odometer Jan 1, 2026	42,000 km
Odometer Dec 31, 2026	62,000 km
Total km driven in year	20,000 km
Total business km (from logbook)	13,000 km
Business-use percentage	65%

All vehicle expenses × 65% = deductible amount.

All Deductible Vehicle Costs — Applied to Business %

Expense Category	Annual Cost Example	Deductible @ 65%
Fuel	$3,600	$2,340
Insurance	$1,800	$1,170
License and registration	$200	$130
Oil changes + servicing	$600	$390
Repairs	$800	$520
Car wash	$150	$98
Business parking	$400	$260
Loan interest (see caps below)	$2,400*	$1,560*
CCA (see class below)	$2,775*	$1,804*
Total deductible		~$8,272

Subject to passenger vehicle caps — see below.

CCA Classes for Vehicles

Class	Rate	Cost Limit	Vehicles
Class 10	30% declining balance	No limit	Vans, trucks, SUVs (not personal/passenger classification)
Class 10.1	30% declining balance	$37,000 cost (2026)	Passenger vehicles (sedans, crossovers, personal SUVs)
Class 54	30%	No limit	Zero-emission vehicles (EVs): separate class, no cost cap for EV incentive
Class 55	40%	No limit	Zero-emission passenger vehicles

Half-year rule: In the year you acquire a vehicle, claim only 50% of the normal annual CCA. In subsequent years, full rate on UCC balance.

Class 10.1 Example — $42,000 Passenger Vehicle, 65% Business Use

Calculation	Amount
Actual vehicle cost	$42,000
Cost limit for Class 10.1	$37,000
UCC opening (year 1)	$37,000
CCA Year 1: 30% × $37,000 × 50% (half-year rule)	$5,550
UCC end of Year 1	$31,450
Business portion of CCA (65%)	$3,608 deductible
Year 2 CCA: 30% × $31,450	$9,435
Business portion Year 2 (65%)	$6,133 deductible

Loan Interest Caps — Passenger Vehicles

Rule	2026 Cap
Maximum deductible interest on passenger vehicle loan	$300/month ($10/day)
No cap on interest for Class 10 vehicles	Full interest deductible × business %
Deductible amount	Lesser of (actual interest) or ($300/month) × business %

Lease Payment Caps — Passenger Vehicles

Rule	2026 Cap
Maximum deductible monthly lease payment	$900/month
Applies to both HST-included and excluded portions	Use the formula in CRA T4002 guide
Class 10 (non-passenger van/truck)	No cap on lease deduction
Deductible lease per month	Lesser of (actual payment) or ($900) × business %

Leasing vs Buying — Tax Comparison

Factor	Buying	Leasing
Deductible expense	CCA + loan interest	Lease payments
CCA class limit (passenger)	$37,000 cost basis	N/A
Lease payment cap (passenger)	N/A	$900/month
Business % applied to	CCA amount + interest	Monthly lease payment
Equity built	Yes — asset on balance sheet	No
Cash flow (monthly)	Higher payments	Lower payments
Tax advantage at cost=$37,000, lease=$800/mo	Roughly equivalent	Roughly equivalent
Vehicle cost over $60,000 (luxury)	CCA still capped at $37,000	Lease still capped at $900/mo

Business vs Personal — What’s Not Deductible

Trip Type	Deductible?
Client visit from home office	✅ Yes (home = principal place of business)
Client visit from external office	✅ Yes
Home to external fixed office (commuting)	❌ No — personal commute
Grocery run, picking up kids, personal errand	❌ No
Conference or trade show travel	✅ Yes
Business lunch driving	✅ Yes
Vacation (even with one business meeting)	Generally No — personal primary purpose