Vehicle & mileage deductions for business (2026)

Business-use vs. personal-use: the logbook is everything

Every vehicle deduction starts with the same question: what percentage of your driving is for business? CRA wants that answer backed by a mileage logbook — date, destination, purpose, and kilometres for each trip, plus odometer readings at the start and end of the year. Commuting from home to a regular place of business is personal, not business, mileage — a common mistake.

Keeping a full logbook every year is tedious, so CRA allows a simplified (sample) logbook once you've kept one full 12-month logbook in a base year: after that, a three-month sample logbook in a later year can be used to project your annual business-use percentage, as long as your driving pattern hasn't materially changed. This is a real time-saver for anyone with a stable driving pattern year to year.

Owned vehicle: what's deductible

If you (or your corporation) own the vehicle, the business-use percentage applies to:

• Fuel
• Insurance
• Repairs and maintenance
• Licence and registration fees
• Capital cost allowance (CCA) — vehicles typically fall into Class 10 (30% declining balance) or Class 10.1 for higher-cost passenger vehicles, which is subject to a capital cost ceiling of $39,000 before tax for 2026 acquisitions — you can't claim CCA on the portion of the vehicle's cost above that ceiling
• Loan interest, capped at $350 per month for 2026 for a new vehicle loan, prorated for business use

Leased vehicle: the deduction cap

If you lease instead of buy, the deductible portion of your lease payments (before applying your business-use percentage) is capped at $1,100 per month, before tax, for new leases entered into in 2026. There's also a separate formula that can further limit the deduction based on the manufacturer's list price, so a lease on a high-end vehicle doesn't always yield the full monthly cap — your accountant can run the actual formula against your lease terms.

The CRA per-kilometre allowance — and when it beats claiming actual costs

Instead of tracking every fuel and repair receipt, many owner-managers have their corporation pay them a per-kilometre allowance for business driving done in a personally owned vehicle. For 2026, CRA's prescribed reasonable rate is:

Paid at or below these rates and based on a genuine logbook of business kilometres, the allowance is not taxable to you and is fully deductible to the corporation — no CCA schedules, no lease-cap math, no receipts to track by category. For an owner who drives moderate business kilometres in an already-paid-off personal vehicle, this is often the simplest and most tax-efficient option. Higher-mileage drivers with an expensive or heavily financed vehicle sometimes come out ahead claiming actual costs instead — it's worth running both numbers.

Which route makes sense for you?

The right choice depends on how many business kilometres you drive, whether the vehicle is owned or leased, its value, and whether it's registered to you or the corporation. Contractors and tradespeople running work trucks often benefit from claiming actual costs given higher mileage and specialized vehicles; consultants and salespeople with a personal vehicle and moderate driving often do better on the per-kilometre allowance. We work through both scenarios with clients in our trucking and real estate practices regularly.

Record-keeping checklist

• A logbook (full-year or CRA-compliant sample logbook) showing date, destination, purpose, kilometres
• Odometer readings at the start and end of the tax year
• Receipts for fuel, insurance, repairs, licensing (if claiming actual costs)
• Lease or loan agreement, if applicable, to apply the correct caps

The bottom line

Track your kilometres properly, know the current caps and rates, and choose the deduction method — actual costs or a per-kilometre allowance — that fits your driving pattern and vehicle. Rates and dollar limits are reviewed annually, so confirm current figures before year-end. Good bookkeeping habits make this painless; see our related post on common bookkeeping mistakes for more, or talk to our tax services team about setting up the right vehicle deduction for your business.

This article is general information, not tax advice — confirm your specific rates and situation with EverStone CPA.

About the author

Sunny Dhillon, CPA

Founder of EverStone CPA, a family-owned Abbotsford firm, and a member of the Chartered Professional Accountants of British Columbia (CPABC). Sunny works with incorporated contractors and small business owners across Canada on tax, bookkeeping and advisory. More about Sunny →