The institution in charge of drawing up and enforcing tax laws is the Canada Revenue Agency (CRA). This authority should be consulted in issues regarding the legal framework for reimbursing your employees tax-free.
This article will address the CRA mileage rate and taxpayers’ automobile income tax deduction limits in 2026. We’ll also discuss how to reimburse employees adequately while keeping your expenses in check.
These rates are effective retroactively as of January 1, 2026 and apply nationally across Canada, with higher prescribed rates only in the Northwest Territories, Yukon, and Nunavut.
So, what is the mileage rate for 2026 in Canada?
For the first 5,000 kilometers driven: 73¢/km
For each additional kilometer: 67¢/km for
In Canadian Territories (Northwest Territories, Yukon, and Nunavut):
For the first 5,000 kilometers driven: 77¢/km for
For each additional kilometer: 71¢/km
Mileage Reimbursement Example (CRA 2026)
Let’s calculate a mileage reimbursement using the CRA mileage rate for 2026.
Your employee Dave drove 1,500 kilometres for business this year.
The CRA reimbursement rate for 2026 is 73¢ per km for the first 5,000 kilometres.
What are other automobile deduction limits you can take advantage of?
Business owners and self-employed individuals in Canada are also eligible for other automobile deduction limits. This tax deduction is referred to as capital cost allowance (CCA), which allows you to recover the cost of the vehicle over several years as it depreciates.
The CRA groups different types of vehicles into classes and assigns a percentage to each class. This percentage is called the CCA rate which represents how quickly a vehicle depreciates.
The limit on capital cost changes every year too. Here are the latest CRA stipulations:
If your vehicle belongs to Class 10.1, the capital cost allowance limit is increased from $38,000 to $39,000(↑ $1,000 from 2025). This limit applies to new and used vehicles purchased on or after January 1, 2026.
The capital cost allowance limit for Class 54 zero-emission passenger vehicles will remain $61,000 before tax(no change from 2025). This limit applies to both new and used vehicles purchased on or after January 1, 2026.
For new leases signed on or after January 1, 2026, the deductible costs will remain $1,100 per month before tax(no change from 2025).
For new automobile loans signed on or after January 1, 2026, the maximum allowable interest deduction will remain $350 per month(no change from 2025).
The Canada Revenue Agency (CRA) establishes an annual per-kilometer rate to be used as a guideline for Canadian employers to follow when setting the rate at which they reimburse their employees.
Implementing the CRA mileage rate isn’t mandatory, meaningbusiness owners can pay more or less than the recommended amount for motor vehicle expenses. It’s worth mentioning that this tax law has nothing to do with employment regulations. Therefore, it doesn’t specify the minimum amount an employer has to pay their employees for any work performed while using their personal vehicles for business purposes.
The CRA mileage rate is the highest per business kilometer rate at which you can reimburse your employees while still being able to receive a tax deduction.
Employers typically stick to this prescribed rate for practical reasons, as it allows them to compensate their employees fairly while simultaneously cutting their tax bill.
Note: If you reimburse your employees at a higher rate, any excess payment is considered taxable income.
Historical CRA mileage rates
What was the CRA mileage rate in 2025?
The CRA mileage reimbursement rates for 2025 reflected rising vehicle operating costs
across Canada and took effect for the full calendar year.
Territories received an additional 4¢ per kilometre, reflecting higher travel costs.
What was the CRA mileage rate in 2023?
In 2023, CRA mileage rates rose moderately following earlier inflationary pressures
on vehicle ownership and fuel costs.
68¢ per kilometre for the first 5,000 kilometres
62¢ per kilometre for each additional kilometre
An additional 4¢ per kilometre in the territories
These rates applied from January 1 through December 31, 2023.
What was the CRA mileage rate in 2022?
CRA mileage rates increased in 2022 as fuel prices and insurance costs rose
following earlier pandemic-related declines.
61¢ per kilometre for the first 5,000 kilometres
55¢ per kilometre for each additional kilometre
An additional 4¢ per kilometre in the territories
Historical CRA mileage rates overview
Over time, CRA mileage rates have fluctuated based on inflation,
fuel prices, insurance costs, maintenance expenses, and vehicle depreciation.
Rates declined slightly during 2020–2021 before rising again from 2022 onward
as operating costs increased nationwide.
Higher rates in the territories reflect longer travel distances,
harsher climates, and limited infrastructure.
Why do CRA mileage rates change each year?
The CRA adjusts mileage rates annually to reflect changes in vehicle operating costs, including fuel, maintenance, insurance, repairs, and depreciation.
Inflation and broader economic conditions are also considered when setting the annual rate.
Why are CRA mileage rates higher in the territories?
Mileage rates are higher in the Northwest Territories, Yukon, and Nunavut because these regions are designated as prescribed northern zones with higher travel and vehicle operating costs.
Factors include harsher climate, longer travel distances, limited infrastructure, and reduced competition among suppliers.
What are the mileage reimbursement rules for employers in Canada?
When discussing mileage reimbursement in Canada it’s important to define in which cases employees are entitled to these expenses.
Do I have to reimburse my employees?
Legally speaking, you don’t have to. It all depends on your agreement or contract with the employee.
Even though no law requires you to reimburse your employees for the business use of their personal vehicle, there’s no reason why you shouldn’t cover these expenses.
It’s very unlikely that someone would be okay with using their personal vehicle for business purposes without being adequately compensated. Employees aren’t just concerned about fuel costs, but vehicles lose their value pretty quickly. For example, most new cars lose 20% of their value over the first year. After five years, a typical car’s value will drop to only 40% of its initial value. If you want to attract quality employees and retain them, you should create a fair mileage reimbursement policy.
Keep in mind, your company can claim a mileage tax deduction at the end of the year if you choose to issue mileage reimbursements. Not only will you keep your employees happy by offering compensation, but you’ll also benefit from tax write-offs.
Do your employees qualify for mileage reimbursement?
If your employees use their personal vehicles for business-related purposes, you can decide to reimburse them for any expenses they paid out of their own pocket.
Here are some examples in which your employees qualify for CRA mileage reimbursement:
Commuting between different work locations, such as construction sites or client homes
Picking up or delivering work-related items
You probably notice that commuting from home to work and vice versa isn’t listed as a reimbursable expense and isn’t constituted as a taxable benefit. The reason for this is straightforward: the CRA, like its U.S. equivalent, the IRS, considers an employee’s home location their choice and is therefore not responsible for covering mileage expenses related to commuting.
Can my company claim a mileage tax deduction?
As we’ve already established, the answer is yes.
If your employees use their personal vehicles for work-related purposes and you reimburse them for these expenses, your company can claim a write-off on the taxes.
However, there are some rules that need to be followed to qualify for a mileage tax deduction.
Paying a reasonable per-kilometer allowance
Apart from using the prescribed CRA mileage rate for 2025, an allowance will be considered reasonable and tax-deductible only if:
It covers the yearly amount of kilometers driven solely for business purposes.
It’s based on a reasonable per-kilometer rate.
The employee hasn’t already been reimbursed for the same use of their vehicle. This doesn’t refer to reimbursing tolls or additional travel insurance that weren’t included in this allowance.
It’s worth mentioning that a reasonable per-kilometer allowance isn’t treated as income, so your employees won’t have to include it in their tax returns.
Using a company car
The situation is more complex if your employees use company cars.
In this case, it really depends on who covers operating expenses and whether the cars are used for business purposes only. That’s why it’s best to consult your accountant on how to maximize your tax return.
A flat-rate car allowance
A flat-rate vehicle allowance that isn’t calculated based on the number of kilometers driven is considered taxable income.
Since this is a lump sum you give to your employees in advance, it can’t be averaged at the end of the year and translated to a per-kilometer allowance to be excluded from the employee’s income.
However, the CRA allows a workaround to help you handle this situation without needing to include a flat-rate allowance in your employee’s income. Find out more about how to average allowances here.
Best practices for implementing the CRA mileage rate
To claim your tax deduction, you must substantiate that you’ve properly implemented the standard mileage rate. You must also prove that your business mileage records are accurate.
How to stay CRA-compliant
According to the CRA, keeping a detailed logbook for the entire year is the best way to provide evidence of business travel and substantiate your mileage claim.
Whenever you or your employees use a personal vehicle for business purposes, the following information should be entered in the logbook to stay compliant:
Date of the trip
Starting location
Destination
Trip purpose
Mileage at the start of the trip
Mileage at the end of the trip
Total kilometers driven
How do you make sure reimbursements are accurate?
The best way to cut your company car expenses and ensure your employees aren’t reporting their personal driving as business miles is to have them do the following:
Keep a logbook with the previously mentioned details
Track mileage
Submit reports on time
Save all documentation related to their business trips. The CRA can conduct an audit and request to check all data, such as odometer readings, toll receipts, traffic cameras, and additional business expenses.
Keeping thorough records encourages employee accountability, allows you to properly reimburse workers, and prevent any issues with the CRA.
But, this is easier said than done, especially if your employees enter details manually with pen and paper. Not to mention that this method is error-prone, which can lead to inaccurate records.
Using a robust mileage tracking app like Timeero helps you streamline mileage reimbursement in Canada. An automatic mileage tracking app keeps your business CRA compliant while eliminating the need for manual data entry.
Timeero’s mileage logs keep your business CRA compliant.
Timeero takes the guesswork out of employee mileage. You no longer need to rely solely on your employees’ word when it comes to the accuracy of their mileage logs or worry if they are taking longer routes. Timeero’s GPS-tracking technology can show you the real-time location of each of your employees. All your workers need to do is clock in at the start of their shift and Timeero automatically tracks their location.
If your business chooses to use Timeero’s geofencing technology, the app will remind your employees to clock in or out once they approach or exit the geofence boundary. This feature discourages time fraud and inaccurate mileage reporting.
Track your employees' work hours, location, and mileage with ease.
If you need to replay entire routes to see where your employees have driven while performing business tasks, the breadcrumb trail feature shows you every stop your worker has taken during their shift.
Timeero’s Segmented Tracking shows you an employees’ entire workday details at a glance.
Timeero works offline and doesn’t require installing expensive hardware.
Since Timeero automatically captures the location, date, and purpose of each trip, the app is a great choice for companies that need to track the mileage of their entire workforce.
The best mileage tracking apps also keep a detailed log of any changes made to an employee’s time or mileage records, which prevents potential disagreements and promotes transparency.
How to claim mileage on taxes In Canada
The CRA is very strict and persistent in preventing excessive claims for business uses of personal cars. The Agency tends to scrutinize the cases in which all or most mileage driven is claimed as business use.
If an audit is requested, you’ll need to determine exactly how many non-business-related miles/kilometers every employee drove and be able to prove this.
To figure this out, determine the total miles/kilometers that were driven using the odometer readings at the beginning and end of the tax year and calculate the difference between the two. Next, subtract the number of business miles/kilometers driven in that period from the total miles/kilometers driven to calculate personal mileage.
Implement a policy for the personal use of company vehicles
If your employees use company vehicles, it’s important to monitor mileage and separate business-related miles from personal miles/kilometers.
Don’t forget that commuting from home to work isn’t considered business-related travel, so it’s taxable.
It’s important to have a policy in place that will allow you to claim mileage with the CRA.
This policy should outline the following:
Who can drive the vehicle - is it only the employee or can their spouse drive the vehicle too?
Is personal use allowed, and to what extent? Define what’s allowed and what’s not. For example, explain whether your employee can use the company vehicle for a family trip.
Specify how employees should keep mileage records. To respect privacy, we discourage tracking employees outside of work hours. As a solution, you can use Timeero. This tool allows tracking of mileage or kilometers exclusively during work hours, ensuring both accuracy and privacy.
Besides tracking mileage and separating business trips from personal use, you and your employees must keep the following relevant documentation:
Receipts for expenses such as gas, oil, repairs, insurance, or any other operating and maintenance costs
Vehicle registration certificate
Lease contract and documentation, if applicable
Tax invoices
The method you used to determine your claim, i.e., if you used the CRA kilometer rate for 2026 or something else
Understanding the 2026 CRA mileage rate
Making sure your employees are fairly reimbursed for driving their personal vehicles for business-related purposes, while simultaneously lowering your expenses can be challenging.
Using the CRA mileage rate will allow your employees to receive proper reimbursement. At the same time, your company will benefit from tax deductions on these business mileage reimbursements.
A tool like Timeero streamlines the entire process of mileage tracking. With its automated tracking feature, the app keeps accurate records without relying on any manual intervention. The seamless submission process simplifies mileage tracking for your employees and allows you to focus on other important aspects of your business without worrying about the accuracy of mileage records.
CRA Mileage Rate: FAQ
What is the CRA mileage reimbursement rate for 2026?
For 2026, the CRA mileage reimbursement rate is 73¢ per kilometre for the first 5,000 kilometres driven and 67¢ per kilometre for each additional kilometre.
In the Canadian territories, the rate is 77¢ per kilometre for the first 5,000 kilometres and 71¢ per kilometre thereafter.
What is the CRA mileage rate in Ontario for 2026?
The CRA mileage rate in Ontario for 2026 is 73¢ per kilometre for the first 5,000 kilometres and 67¢ per kilometre for each additional kilometre. CRA mileage rates are the same across all provinces and differ only in the territories.
What is the CRA mileage rate in British Columbia for 2026?
The CRA mileage rate in British Columbia for 2026 is 73¢ per kilometre for the first 5,000 kilometres and 67¢ per kilometre thereafter. This rate applies uniformly across Canada, except for the territories.
What is the CRA mileage rate in Quebec for 2026?
The CRA mileage rate in Quebec for 2026 is 73¢ per kilometre for the first 5,000 kilometres and 67¢ per kilometre for each additional kilometre. There are no province-specific CRA mileage rates.
What is the CRA mileage rate in New Brunswick for 2026?
The CRA mileage rate in New Brunswick for 2026 follows the national rate of 73¢ per kilometre for the first 5,000 kilometres and 67¢ per kilometre after that. Only the northern territories have higher prescribed rates.
Was the CRA mileage rate different in 2025?
Yes. In 2025, the CRA mileage rate was 72¢ per kilometre for the first 5,000 kilometres and 66¢ per kilometre for each additional kilometre. The 2026 rate represents a 1¢ per kilometre increase.
Does the CRA set different mileage rates by province?
No. The CRA mileage rate is national, meaning it applies equally in all provinces. Higher rates apply only in the Northwest Territories, Yukon, and Nunavut due to higher operating costs.
Capture mileage in real-time and avoid inaccurate reporting with Timeero.
Andjelka is a researcher and writer with 7+ years in digital marketing. Her background in social work and journalism has sharpened her skill in connecting with people from all walks of life. For the past 4 years, she’s specialized in time, location, and mileage tracking. Outside work, she enjoys yoga, swimming, and unwinding with her cats while listening to Leonard Cohen’s music.
%202.svg)
.png)
.png)
.png)
