Vehicle Expenses and Mileage: What the CRA Allows

If you drive your own car for work, the difference between a clean deduction and a denied one usually comes down to one thing: records. The rules on vehicle expenses mileage CRA reviewers apply are not complicated, but they are strict, and "I drive a lot for business" is not a number the CRA can accept. This guide walks you through what you can claim, how to split personal from business use, and how to keep a logbook that survives scrutiny.

How vehicle expenses mileage CRA rules actually work

The core idea is simple: you can deduct the portion of your vehicle costs that relates to earning income. If 65 per cent of your driving is for business, you can generally deduct 65 per cent of your eligible car expenses. The other 35 per cent is personal and stays on your own tab.

How you apply that percentage depends on whether you are self-employed or an employee. If you are self-employed, you claim your actual costs multiplied by your business-use percentage. If you are an employee using your own car for work, you can usually only deduct expenses if your employer required it and signed a Form T2200, and many employees instead receive a per-kilometre allowance from their employer.

Where the per-kilometre rate fits in

The CRA's "reasonable" per-kilometre rate is the benchmark for employer-paid allowances, not a shortcut most self-employed people use to calculate their own deduction. For 2026 that rate is 73 cents per kilometre for the first 5,000 kilometres and 67 cents for each kilometre after that (higher in the territories). If your employer reimburses you at or near that rate, the allowance is generally tax-free and you do not claim vehicle expenses separately. If you are self-employed, you track real receipts instead.

What you can (and cannot) claim

Eligible operating and ownership costs, prorated by business use, generally include:

• Fuel and oil
• Maintenance and repairs
• Insurance and licence and registration fees
• Interest on a loan used to buy the vehicle (subject to a monthly cap)
• Lease costs (subject to a monthly cap)
• Capital cost allowance (depreciation) on a vehicle you own

Some costs sit outside the standard proration. Parking fees paid while earning business income are fully deductible on their own, and supplementary business insurance is treated separately as well. Traffic and parking fines are never deductible. And the everyday commute between your home and a regular place of business counts as personal driving, not business, which surprises a lot of people.

The logbook is the whole game

Your business-use percentage is only as good as the record behind it. The CRA expects a logbook, and for each business trip it should capture the date, the destination, the reason for the trip, and the kilometres driven. At the start and end of the year you record the odometer reading so you can prove total kilometres for the period.

A full-year logbook is the gold standard. The CRA also accepts a sample logbook once you have established a full base year: keep a detailed log for one representative three-month period, and you can extrapolate your business-use percentage for later years, provided your driving pattern has not materially changed. In practice, a phone app that logs trips automatically removes almost all of the pain and gives you defensible data.

A guess is not a deduction. If you cannot show the kilometres, the CRA does not owe you the write-off.

A worked example

Say you are a self-employed consultant. Over the year you drive 18,000 kilometres in total, and your logbook shows 11,700 of them were to see clients, pick up supplies, and attend business meetings. That is a business-use percentage of 65 per cent.

Your total car costs for the year add up to $9,000 (fuel, insurance, repairs, licence, plus allowable depreciation). Your deductible amount is 65 per cent of $9,000, or $5,850. If instead your logbook only supported 40 per cent business use, the same $9,000 of costs would yield a $3,600 deduction. The receipts did not change; the record of how the car was used did.

Owning versus leasing, and the depreciation cap

If you buy a passenger vehicle, you claim depreciation through capital cost allowance rather than deducting the full purchase price in one year. The cost you can base that on is capped: for a passenger vehicle bought in 2026, the CCA ceiling is $39,000 before tax. Zero-emission vehicles have a higher ceiling. Interest on a vehicle loan is capped at $350 per month, and if you lease, the deductible lease cost is capped at $1,100 per month before tax. These caps mean a luxury car does not translate into an unlimited write-off.

Keep the receipts, not just the log

The logbook proves the percentage; receipts prove the dollars. Keep every fuel, repair, insurance, and lease record, along with your purchase or lease agreement. The CRA generally expects you to keep supporting documents for six years from the end of the tax year they relate to.

Common mistakes that trigger a review

Most denied vehicle claims are not the result of aggressive tax planning; they come from ordinary record-keeping slips. A few patterns show up again and again:

• Round numbers. A business-use percentage that lands on exactly 50 or 90 per cent with no logbook behind it invites questions. Real driving is rarely that tidy.
• Counting the commute. Driving from home to your regular office or shop is personal. Only when your home is your principal place of business does travel from there to clients generally count.
• Claiming 100 per cent business use. Unless you genuinely have a separate personal vehicle, claiming that a single car is used entirely for business is a red flag the CRA looks for.
• No odometer readings. Without a start-of-year and end-of-year odometer figure, you cannot prove total kilometres, and your percentage is unsupported.
• Reconstructing the log at tax time. A log built from memory in April is far weaker than trips recorded as they happened.

The fix for every one of these is the same: record trips contemporaneously and keep the receipts. A little discipline through the year is far cheaper than defending a shaky claim later.

Vehicle claims are one of the most common areas the CRA reviews, and they are also one of the easiest to get right once you have a system. If you are unsure whether you are an employee or self-employed for these purposes, how to set up a defensible logbook, or whether owning or leasing makes more sense for your situation, we can help. Book a consultation or learn more about our personal tax services, and we will make sure your driving works as hard on your return as it does on the road.

This article is general information, not tax, legal, or financial advice. Rules and figures are current as of 2026 and can change. Please confirm your own situation with Lewis Partners.