Can I Claim Motor Vehicle Expenses as a Business Expense in Canada?
Partially deductible based on business-use percentage. You can claim actual costs (fuel, insurance, maintenance, CCA) multiplied by the business proportion. The employee per-kilometre allowance limit for 2026 is 73 cents for the first 5,000 km and 67 cents after, which many employers use as a reasonable rate. Passenger vehicles costing more than CAD 39,000 (acquired in 2026) have a CCA cost cap.
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What Canada Revenue Agency (CRA) says
CRA allows motor vehicle expenses under Sections 18(1)(a) and 13 of the Income Tax Act. The deductible amount is business kilometres divided by total kilometres, multiplied by total vehicle expenses. Class 10 CCA applies at 30% declining balance for most vehicles. Class 10.1 applies to passenger vehicles costing more than the prescribed limit, which is CAD 39,000 for vehicles acquired on or after 1 January 2026 (CAD 38,000 in 2025, CAD 37,000 in 2024). The monthly lease deduction is capped at CAD 1,100 and the monthly interest deduction at CAD 350 for 2026. Zero-emission passenger vehicles in Class 54 have a cost limit of CAD 61,000.
When you can claim
- Fuel, oil, and operating costs proportionate to business kilometres driven
- Auto insurance premiums in proportion to business use
- Repairs and maintenance in proportion to business use
- CCA (Class 10 at 30%) on the vehicle cost in proportion to business use
- Parking fees and supplementary business insurance, which can be deducted in full
When you cannot claim
- Commuting from home to a regular fixed place of business (this is personal travel)
- Personal-use portion of all vehicle expenses
- Fines and penalties
- CCA deduction on the cost portion of a passenger vehicle above the Class 10.1 limit (CAD 39,000 for 2026 acquisitions)
- Lease payments above CAD 1,100 a month and interest above CAD 350 a month, which are restricted
Good to know
Pro tip: Keep a contemporaneous mileage log recording the date, destination, purpose, and kilometres for every business trip, plus odometer readings at the start and end of the fiscal period. CRA can deny the motor vehicle deduction entirely without adequate records. A full logbook for one base year can be followed by a three-month sample if usage stays within 10% of the base year.
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