CRA Mileage Rate 2026 and the Logbook That Survives an Audit

The 2026 CRA Per Kilometre Rates

Two things go wrong with vehicle claims in Canada. People use the wrong rate, and people cannot prove their kilometres when CRA asks. The first costs a bit of money. The second can wipe out the entire claim. For 2026 the reasonable per kilometre rates are 73 cents for the first 5,000 business kilometres and 67 cents for every kilometre after that, with an extra 4 cents in the territories. The 5,000 km threshold resets each calendar year and applies per employee, not per vehicle and not per company.

These are the rates CRA considers reasonable for a tax free allowance paid by an employer, and the amounts a self employed person or corporation can deduct when reimbursing on a per kilometre basis. 

What Changed From 2025, and the Territories Add On

The increase is one cent at both tiers, reflecting higher vehicle operating costs. The 4 cent territorial supplement is unchanged and applies to kilometres driven in the Northwest Territories, Yukon and Nunavut. Two things people get wrong every January. The rate is set by the calendar year in which the driving happened, so a corporation with a June year end uses two rates in one fiscal year. And an employer paying above the CRA rate is not breaking a rule, but the excess is generally treated as a taxable benefit unless it can be justified as reasonable.  

Who Can Use the Per Kilometre Rate: Employees, Contractors and Corporations

That third row surprises a lot of people. A sole proprietor does not get to claim 73 cents per kilometre. You track total kilometres and business kilometres, then deduct that percentage of your real costs: fuel, insurance, repairs, licence, interest and capital cost allowance, alongside everything else in our guide to tax filing for self employed professionals in Canada. For an incorporated owner, reimbursing yourself at the CRA rate from the corporation is usually simpler and often better, because it moves money out of the company tax free and deductibly without payroll. Whether the company should own the vehicle at all is a separate calculation, and we run the numbers on it in buying a car through your corporation.  

Reasonable Allowance vs Taxable Benefit: Where Employers Get It Wrong

An allowance is tax free to the employee only if it is based solely on kilometres actually driven and is reasonable. Three common ways employers break that:

• Flat monthly car allowances. A $600 a month vehicle allowance with no kilometre tracking is taxable income, full stop, and it goes on the T4.
• Paying per kilometre and also covering fuel. Combining a per km allowance with reimbursed operating costs makes the allowance taxable.
• Rates well above CRA’s. The excess is generally a taxable benefit.

If you are running a flat allowance today and want it tax free, the fix is to switch to a per kilometre plan with real logs. It usually costs the company less as well. The wider list of what can and cannot be paid tax free is in our guide to non taxable benefits for employers and employees in Canada.  

Medical Travel and Moving: The Separate Provincial Rates

Vehicle costs claimed for medical travel, moving expenses and the northern residents deduction use a completely different set of rates, published per province and territory rather than the two tier business rates above. British Columbia has its own cents per kilometre figure, and it is not 73 cents. One quirk worth knowing: CRA typically publishes these provincial rates after the calendar year they apply to, often partway through the following year. If you are claiming medical travel for 2026, the correct rate may not be published when you first prepare the return, so check CRA’s current table before filing rather than assuming last year’s number. You can also use the detailed method and claim actual receipts instead. For a long trip in an expensive vehicle, actual costs sometimes beat the flat rate.  

What CRA Requires in a Logbook: Full Method vs Simplified Method

The full logbook. For each business trip, record the date, destination, purpose and kilometres driven. Record the odometer at the start and end of the fiscal period, and note any vehicle change with the date and odometer reading. The simplified method. Once you have kept a full logbook for one complete year, that becomes your base year. In later years you can keep a three month sample logbook and extrapolate, as long as your business use stays within 10 percentage points of the base year.

The calculation CRA applies is: (Sample period business use % divided by the same period in the base year %) multiplied by the base year annual business use % equals your annual business use %. So if the base year showed 46% business use across the year, and your April to June sample shows 51% against 46% for the same months in the base year, the calculated annual figure is about 54%, which is within the acceptable band. If the result drifts more than 10 percentage points from the base year, the sample no longer works and you either track the other nine months or start a new full base year. Either way the logbook is kept for six years, in line with the CRA record keeping requirements that apply to every other receipt in the file.  

Worked Example: Calculating a Reimbursement and What Goes on the T4

An employee drives 7,400 business kilometres in 2026 in British Columbia.

The employer deducts $5,258 as a business expense. Because the allowance is per kilometre, reasonable and supported by a logbook, nothing goes on the employee’s T4 and the employee reports nothing. Change one fact: the employer also pays for the employee’s fuel card. Now the allowance is no longer reasonable, the full $5,258 becomes a taxable benefit in box 14 and box 40, and payroll deductions apply. Catching that before the slips go out is exactly what a payroll compliance checklist is for.  

The Mistakes That Trigger a Vehicle Expense Review

• Round numbers. A claim of exactly 20,000 business kilometres reads as an estimate, not a record.
• Business use above 90% on a vehicle that is clearly the household’s only car.
• No odometer readings at the start and end of the year.
• Commuting counted as business. Travel between home and your regular place of work is personal, with narrow exceptions.
• Reconstructing the log after the fact. Contemporaneous records carry weight. A spreadsheet built the week CRA writes does not.
• Mismatch between the log and the vehicle. Kilometres claimed that exceed the odometer change for the year.

Any of these can turn into a desk review, and our guide to how CRA reviews small business returns explains what that process looks like. The good news is that this is one of the easiest areas to get right. An app that logs trips automatically, reviewed monthly, removes almost all of the risk. If your business reimburses several drivers, or you are unsure whether your current allowance is creating a taxable benefit nobody has reported, Maxpro Financials reviews vehicle policies and payroll treatment for BC employers and fixes the setup before CRA finds it.  

FAQ: CRA Mileage Rates and Logbooks

What is the CRA mileage rate for 2026?

73 cents per kilometre for the first 5,000 business kilometres, 67 cents after that, plus 4 cents in the territories.  

Can I claim mileage as a sole proprietor?

Not at the per kilometre rate. You claim a business use percentage of your actual vehicle costs, supported by a logbook.  

Is driving from home to the office deductible?

No. Commuting is personal. Travel from your workplace to a client, or between work sites, is business.  

Do I need a logbook if I get a per kilometre allowance?

Yes. The allowance is only tax free because it is based on actual kilometres, and that requires records.

Can I use an app instead of a paper logbook?

Yes. CRA accepts electronic records. What matters is that the required details are captured and the record is kept contemporaneously.  

How long do I keep the logbook?

Six years from the end of the tax year it relates to, the same as other supporting records.  

What if I use the car for two businesses?

Track kilometres separately for each and allocate costs accordingly. Do not claim the same kilometres twice.  

Is a flat monthly car allowance taxable?

Yes, unless it is based on kilometres driven. Flat allowances go on the T4 as income.  

Does the 5,000 km threshold reset each year?

Yes, every calendar year, and it applies per employee.  

Are medical travel rates the same as business rates?

No. Medical travel, moving and northern residents claims use separate provincial rates that CRA publishes on its own schedule.

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