2026 Canada CRA Mileage Rates: $0.73/$0.67 and CPA Checklist

Last updated: October 18, 2026

For 2026, the CRA’s prescribed per-kilometre allowance rate is $0.73 for the first 5,000 business kilometres and $0.67 for every kilometre after that, in every province. If you’re driving in one of the territories, those figures rise to $0.77 and $0.71. These are the rates the CRA generally treats as reasonable, which means an allowance paid at these levels is usually tax-exempt to the employee, provided a few conditions are met. The full historic breakdown and how to apply it follow below.

TL;DR:

• The 2026 CRA mileage rates are $0.73 per km for the first 5,000 km and $0.67 after, with higher rates of $0.77 and $0.71 in territories, and these rates are adjusted annually to reflect fuel and maintenance costs.

• To qualify as tax-exempt, mileage allowances must be based solely on actual business kilometers, paid at or near CRA rates, and not reimbursed separately for vehicle expenses, or else they become taxable income.

• Employers using company vehicles for personal use must calculate taxable benefits at 34 cents per km for most employees, which is a separate process from mileage reimbursements and often causes payroll errors.

• Accurate recordkeeping, including trip dates, odometer readings, destinations, purposes, and business versus personal kilometers, is essential for CRA compliance and retention for six years.

• Regular reconciliation of mileage logs and reimbursements, along with clear policies, helps businesses avoid common mistakes and ensures their allowances remain tax-appropriate.

Table of Contents

• Historic CRA mileage rates by year

• What makes a per-kilometre allowance tax-exempt?

• How are employer-provided vehicles taxed differently?

• What records does the CRA require for mileage claims?

• Why does the CRA change mileage rates every year?

• Mileage Rates from 2010 to 2026

• How do you calculate a mileage reimbursement or deduction?

• A note from a T-Ledgers CPA on applying these rates correctly

• Three mistakes I see in mileage policies every year

• Get your mileage policy and payroll right the first time

• Where to verify these rates yourself

• Sources

• FAQ

Historic CRA mileage rates by year

The CRA adjusts its prescribed rate almost every year to track fuel costs, vehicle maintenance, and inflation. Looking at the trend since 2015 makes the pattern clear: rates barely moved for years, then climbed sharply from 2022 onward as fuel prices spiked.

The Department of Finance’s 2026 announcement confirmed another one-cent increase to the provincial rate, continuing a run of annual bumps that started when fuel costs surged in 2022.

This table draws on the CRA’s automobile allowance guidance, which publishes the current and several prior years’ rates for both provincial and territorial claims. If you’re reconstructing older claims from 2015 through 2021, that same CRA page keeps the archived figures, and your bookkeeper or the CRA’s own historical tables should be your reference rather than a third-party estimate. The territory add-on has held steady at four cents per kilometre above the provincial rate across every year shown, reflecting the CRA’s long-standing view that higher fuel and transport costs in the North justify a consistent premium.

What makes a per-kilometre allowance tax-exempt?

A mileage allowance doesn’t become tax-free just because it’s labelled as such on a pay stub. The CRA sets out three specific conditions that must all be satisfied:

• The allowance is based solely on the number of business kilometres driven, not a flat monthly amount.

• The rate paid is reasonable, which in practice means it lines up closely with the CRA’s prescribed rate for that year.

• The employee isn’t also reimbursed separately for expenses tied to the same vehicle use, such as fuel or repairs.

The prescribed rate functions as a safe harbour. Pay at $0.73 per kilometre for the first 5,000 km in 2026 and you’re on solid ground without needing to justify your own custom calculation. Deviate significantly, either much higher or much lower without a documented reason, and you invite the CRA to look twice. If an allowance fails any of the three conditions, it stops being a tax-free reimbursement and becomes taxable income, which means you need to add it to the employee’s T4 and withhold source deductions accordingly. Payroll systems that aren’t set up to flag this distinction are one of the most common places small businesses trip up.

How are employer-provided vehicles taxed differently?

Per-kilometre allowances only apply when an employee uses their own vehicle for work. When the employer owns or leases the vehicle and the employee drives it, the calculation flips entirely, and it’s calculated as a taxable benefit rather than a reimbursement.

For 2026, the CRA’s prescribed rate for this fixed-rate benefit calculation is:

1. 34 cents per kilometre for most employees driving a company vehicle for personal use.

2. 31 cents per kilometre for employees principally employed in selling or leasing automobiles.

Quick math: an employee who drives a company car 4,000 personal kilometres in a year faces a taxable benefit of 4,000 × $0.34 = $1,360, added to their income for the year, separate from any operating cost benefit the employer may also need to calculate. This is a fundamentally different mechanism from the per-kilometre allowance discussed above, and mixing the two up on a T4 is a common payroll error.

What records does the CRA require for mileage claims?

Even a perfectly reasonable rate won’t protect you without documentation to back it up. The CRA’s recordkeeping rules expect a log that captures, at minimum:

1. The date of each trip.

2. Odometer readings at the start and end of the year, plus the destination and purpose of each business trip.

3. Total kilometres driven for business versus personal use.

Keep these records until December 31 of the sixth year after the tax year they relate to, or until employment ends, whichever comes first. A spreadsheet works, a mileage-tracking app works, and a paper logbook cross-checked against timesheets works too. What doesn’t work is reconstructing a year’s driving from memory in April.

Pro Tip: Reconcile logged mileage against payroll reimbursements every month rather than waiting for year-end. It catches errors while they’re still fixable, and it makes issuing a T2200 to employees who claim their own vehicle expenses far less of a scramble.

Why does the CRA change mileage rates every year?

Mileage rates aren’t set arbitrarily. The prescribed rate is meant to approximate the real cost of operating a vehicle, so the CRA and Department of Finance track a handful of specific inputs each year:

• Average fuel prices across the country.

• General inflation and the rising cost of vehicle maintenance and repairs.

• Vehicle depreciation, which also factors into the annual Capital Cost Allowance ceiling.

• Regional cost differences, which is why the territories carry a consistent premium over provincial rates.

The Department of Finance’s 2026 announcement bundled the one-cent per-kilometre increase together with a bump to the Capital Cost Allowance ceiling for Class 10.1 vehicles, underlining that mileage rates and vehicle purchase limits move for the same underlying reasons. When fuel prices spiked in 2022, the jump from $0.59 to $0.61 (and the territorial equivalent) was the CRA’s response to that specific pressure, not a routine cost-of-living tweak.

Mileage Rates from 2010 to 2026

How do you calculate a mileage reimbursement or deduction?

The arithmetic is straightforward once you know which side of the transaction you’re on.

Example A: employer reimbursing an employee. Say an employee drives 6,200 business kilometres in 2026. The first 5,000 km are paid at $0.73, and the remaining 1,200 km at $0.67. That’s (5,000 × $0.73) + (1,200 × $0.67) = $3,650 + $804 = $4,454 total paid tax-free provided the three conditions above are met.

Example B: employee claiming without reimbursement. If you’re self-employed or an employee who received no allowance at all, you claim actual vehicle expenses (fuel, insurance, maintenance, CCA) prorated by the percentage of kilometres driven for business, based on your logged totals. Instead of applying the CRA’s flat per-kilometre rate, self-employed filers work out the business-use percentage from their logbook and apply it against actual receipts, which usually produces a different figure than the flat-rate method above.

A note from a T-Ledgers CPA on applying these rates correctly

Wajahat Ajmal, CPA, works with T-Ledgers Accounting clients on exactly this kind of payroll and mileage question, and the pattern is consistent: businesses that treat the prescribed rate as a set-and-forget number tend to run into trouble at reassessment. Reconciling mileage reimbursements against payroll records every month, rather than at year-end, catches the two or three trips that got miscoded before they become a bigger headache. For deeper detail on applying these figures to your business, T-Ledgers’ guide to CRA vehicle expenses walks through the mechanics further.

Three mistakes I see in mileage policies every year

The same three errors show up on almost every file that gets flagged for review. First, businesses combine a flat monthly car allowance with a per-kilometre payment for the same vehicle, which the CRA treats as taxable the moment both exist together. Second, logs are reconstructed after the fact instead of kept contemporaneously, and weak logs undermine an otherwise reasonable rate. Third, some employers assume any number they pick is automatically tax-exempt just because it’s called a “mileage rate,” when unreasonable rates get reclassified regardless of intent.

Paste this into your policy file: one vehicle, one allowance type, one contemporaneous log, matched to the CRA’s prescribed rate.

— Wajahat Ajmal (CPA)

Get your mileage policy and payroll right the first time

Getting the rate right is only half the job. The harder part is building a payroll process that applies it consistently, keeps logs audit-ready, and flags the moment an allowance drifts into taxable territory. Our team can support clients with payroll setup and reconciling mileage reimbursements against bookkeeping records each month.

Our virtual CFO services help you build a mileage and vehicle policy that holds up under CRA scrutiny, backed by bookkeeping that keeps every reimbursement reconciled against your logs in real time. If you’d rather start with a conversation about your specific setup, get in touch with our team and we’ll walk through what your business actually needs.

Where to verify these rates yourself

• CRA automobile allowance guidance, the primary source for current and historic per-kilometre rates.

• Department of Finance’s 2026 announcement, covering deduction limits and benefit rate changes.

• Motor vehicle recordkeeping rules, on log requirements and retention periods.

• T-Ledgers’ vehicle expenses guide, for practical application to your own business.

This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.

Sources

• Canada

• Canada

FAQ

What is the CRA-approved mileage rate?

For 2026, the CRA’s prescribed per-kilometre allowance rate is $0.73 for the first 5,000 business kilometres and $0.67 for every kilometre after that in every province. In the territories, those figures rise to $0.77 and $0.71.

What is the CRA’s mileage reimbursement rate for 2026?

For 2026, the CRA’s prescribed per-kilometre allowance rate is $0.73 for the first 5,000 business kilometres and $0.67 for every kilometre after that in every province. The territorial rates are $0.77 and $0.71, as confirmed in the Department of Finance’s 2026 announcement.

Is there a CRA “10-year rule” for mileage records?

There’s no specific “10-year rule” for mileage logs; the CRA requires records to be kept until December 31 of the sixth year after the tax year in question, or until employment ends.

Do I need a written mileage policy to keep an allowance tax-exempt?

The CRA doesn’t require a written policy by name, but a documented policy paired with contemporaneous logs is the strongest evidence that your allowance meets the three conditions for tax-exempt treatment.

Can T-Ledgers Accounting help set up a compliant mileage policy?

Yes. T-Ledgers Accounting’s payroll and bookkeeping services help businesses reconcile mileage reimbursements, apply the correct prescribed rate, and maintain the records CRA expects during a review.

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• Corporate tax rates Canada: 2026 guide for business owners

This article is intended to inform readers in general terms. It is not intended to provide any tax or business advice. Please consult your T-Ledgers advisor if you have any questions about your unique situation. While we have tried to ensure the accuracy of the information in this article, we accept no liability for errors or omissions.