CRA Mileage Rate 2026: 73¢/km First Tier, 67¢/km After
The Canada Revenue Agency's reasonable per-kilometre rate for 2026 is $0.73 per kilometre for the first 5,000 business kilometres of the year and $0.67 per kilometre for every kilometre after that. Drivers in the Northwest Territories, Yukon, and Nunavut get an additional $0.04 per kilometre on top of both tiers.
How the tier works
The 5,000-kilometre boundary is per car, per calendar year. Once the cumulative business kilometres on a vehicle pass 5,000 in a single tax year, every additional kilometre is deducted at the lower tier-2 rate. The clock resets on January 1.
If you use two vehicles for business, each gets its own 5,000-kilometre tier-1 allowance. The rate is applied per car, not per driver.
Territory bonus: NT, YT, NU
If you live in or operate from the Northwest Territories, Yukon, or Nunavut, the CRA recognises that vehicle costs are higher and adds $0.04 per kilometre to the standard rate. That makes the 2026 rate $0.77 per kilometre for the first 5,000 km and $0.71 after, in those three territories.
The bonus applies to the full year if your work base is in one of the three territories. It does not pro-rate based on how much driving happens north versus south.
Who can use the per-km rate
Self-employed Canadians (sole proprietors, partners, and incorporated business owners) deduct vehicle expenses on form T2125. The per-km method is one of two options; the other is actual expenses (gas, insurance, maintenance, depreciation via capital cost allowance) prorated by business-use percentage.
Employees who use a personal vehicle for work and are required by their employer to do so can claim the difference between what the employer reimburses and the CRA reasonable rate, using form T777 plus a signed T2200 from the employer.
Employees whose employer fully reimburses at or above the CRA rate cannot also deduct mileage on a return; the reimbursement is non-taxable income and the deduction is closed off.
What records the CRA expects
A logbook with the date, destination, business purpose, and kilometres driven for each business trip. Odometer readings at the start and end of the year. Per CRA's IT-522R guidance, the log should be contemporaneous, recorded at or near the time of the trip, not reconstructed from memory at year-end.
Keep the log for six years from the end of the tax year it relates to. The CRA can request it if you are reviewed.
FAQ
Are commute kilometres deductible?
No. Driving from your home to your regular place of business is personal mileage in Canada, just like the United States. The exception is when your home qualifies as your principal place of business - common for self-employed Canadians with a CRA-recognised home office.
Does the CRA rate cover gas, insurance, and maintenance?
Yes. The reasonable per-km rate is meant to cover all operating costs of running a personal vehicle for business: gas, insurance, maintenance, depreciation, registration, and minor repairs. You cannot deduct those costs on top of the per-km rate. Parking and tolls are deductible separately.
Can I switch to the actual-expenses method later?
Yes. Unlike the IRS rule in the US, the CRA does not lock you into the per-km method for the life of the vehicle. You can use whichever method produces the larger deduction in any given year, as long as you have the records to support the actual-expenses calculation.
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