Company Car vs Personal Car: Standby Charge or Allowance

Once you incorporate, the question "can I write off my car?" splits in two, and the answer depends on whose name is on the ownership.

If the corporation owns or leases the car and lets you drive it, the car is an employer-provided automobile. The corporation deducts the costs of running it, and you are taxed on the personal use through two amounts the Income Tax Act spells out: a standby charge and an operating expense benefit. If you own the car, the corporation can pay you a per-kilometre allowance for the business driving, and a reasonable one is not taxed in your hands at all.

A common assumption is that putting the car in the company is automatically the better deal because "the company pays for everything". The statute does not work that way. The standby charge is computed on what the car cost, not on how much you drove it, and it can be large even when you barely use the car personally. This page states both rules the way the Act states them, then runs one year of driving through each so you can see the arithmetic side by side.

Option A: the corporation owns or leases the car

Paragraph 6(1)(e) of the Income Tax Act includes in your employment income a reasonable standby charge for any automobile made available to you (or to someone not at arm's length with you, such as your spouse) because of your office or employment. Subsection 6(2) then defines "reasonable standby charge" with a formula. It is not a judgment call and it is not a fair-market rent.

If the car is made available to you in your capacity as a shareholder rather than as an employee or officer, the benefit falls under subsection 15(1) instead. Subsection 15(5) says the value is computed as though subsections 6(1), 6(1.1), 6(2) and 6(7) applied, reading "the employer" as "the corporation". The arithmetic is the same either way. What changes is the slip: the CRA has an employee's automobile benefit reported on the T4 under code 34, and a shareholder's on a T4A under code 028.

The standby charge formula

Subsection 6(2) gives the standby charge as:

A/B × [2% × (C × D) + 2/3 × (E - F)]

Here is what each letter means, in the Act's own terms.

Letter	What it is
C	The cost of the automobile to the corporation, where it owns the car
D	The days the car was made available to you while the corporation owned it, divided by 30, rounded to the nearest whole number if the result is more than one (a result exactly halfway rounds down)
E	The lease payments payable by the corporation for the days the car was made available to you while it was leased
F	The part of E that is for insurance against loss of or damage to the car, or liability for its use
B	1,667 multiplied by the number of available days divided by 30, rounded the same way
A	Normally equal to B, so A/B is 1. It can be smaller only in the reduced case below

So for an owned car the standby charge is 2% of cost for every 30-day period it is available to you. For a full year, 365 days divided by 30 is 12.17, which rounds to 12, so the standby charge on an owned car available all year is 24% of its cost.

For a leased car it is two-thirds of the lease payments, less the insurance component. A car on an $800 monthly lease, with no insurance in the payments, available for twelve months carries a standby charge of 2/3 × $9,600 = $6,400 before any reduction.

Three things about the inputs catch people.

Cost means cost, taxes included. Subsection 6(7) makes the cost of property include the GST/HST and provincial sales tax paid on it. The CRA's guidance adds that options and accessories are included and a trade-in does not reduce it.

Cost does not depreciate. C is the car's cost to the corporation, not its value today. Available for the same days, the same car carries the same full standby charge in its fifth year as in its first.

Made available is not the same as driven. The CRA treats a car as made available on any day you have access to it or control over it, including days it sits unused in your driveway. The days counted in D and B are days of availability.

The reduced standby charge

The standby charge assumes your personal driving is at least 1,667 km per 30-day period. When it is less, A shrinks and the charge shrinks with it, but only if both conditions in paragraph (a) of the description of A are met:

1. The corporation requires you to use the car in connection with or in the course of your office or employment.
2. The distance the car travels in the available days is primarily in connection with or in the course of your office or employment. The CRA reads "primarily" as more than 50% of the kilometres.

When both hold, A is the lesser of your personal kilometres and B. For a car available all year, B is 12 × 1,667 = 20,004 km, which is where that figure comes from. Personal driving of 8,000 km in a full year makes the fraction 8,000 / 20,004, and the standby charge falls to about 40% of the full amount.

Fail either condition and A equals B, and you pay the full standby charge however little you drove personally. Driving 45% business and 55% personal gets no reduction at all.

Personal driving here has the ordinary employment meaning. The CRA's automobile benefit guidance counts travel between home and a regular place of employment as personal, even in a company car. Where that line falls is worth settling before you count a single kilometre.

Amounts you pay the corporation for the use of the car (other than operating expenses) during the year reduce the standby charge under 6(1)(e)(ii).

The operating expense benefit

If the corporation also pays the operating costs attributable to your personal driving, paragraph 6(1)(k) adds a second amount. The CRA lists fuel, oil, maintenance, repairs, licences and insurance as operating costs, and not interest, capital cost allowance, lease costs, parking or tolls.

The benefit is computed one of two ways.

• The fixed rate. Your personal kilometres multiplied by the amount prescribed by section 7305.1 of the Income Tax Regulations. For 2026 that amount is 34 cents a kilometre, or 31 cents where you are employed principally in selling or leasing automobiles.
• The election, half the standby charge. If the car is used primarily for your employment duties and you notify the corporation in writing before the end of the year that you want this method, the benefit is one-half of the standby charge instead.

Whichever applies, anything you repay the corporation for operating costs in the year, or within 45 days after it ends, comes off the benefit. The operating expense benefit exists only where a standby charge does, so it applies to a car the corporation owns or leases, not to your own car.

What the corporation deducts

The corporation deducts its costs of owning and running the car like any other business asset, subject to the passenger-vehicle limits in section 7307 of the Regulations. A passenger vehicle bought in 2026 has its capital cost for capital cost allowance capped at $39,000 for 2026, before tax. The standby charge has no equivalent cap: it runs on the full cost. The capital cost allowance guide covers the Class 10.1 rules, and the leased vehicle guide covers the lease limits.

One boundary: the standby charge applies to an automobile as the Act defines it. Certain vans and pickup trucks are excluded from that definition, depending on their seating and on how much of their driving is carrying goods, equipment or passengers for the business, and a different set of benefit rules applies to them. Whether your truck is in or out is its own question.

Option B: you own the car and the corporation pays an allowance

If the car is yours, there is no standby charge, because the corporation has not made an automobile available to you. Instead the corporation can pay you an allowance for the business kilometres you drive in your own car.

Subparagraph 6(1)(b)(vii.1) keeps a reasonable per-kilometre allowance out of your income, and paragraph 18(1)(r) limits what the corporation may deduct for it to the amount prescribed by section 7306 of the Regulations. For 2026 that amount is 73 cents a kilometre for the first 5,000 km and 67 cents after. The allowance has to be based only on business kilometres, it has to be reasonable, and the corporation cannot also reimburse the same use of the car. You pay the car's costs yourself out of the allowance.

Every condition on that list, and what happens when one fails, is in paying yourself a per-kilometre allowance from your own corporation. This page only needs the arithmetic.

One year, worked both ways

The inputs, stated once and used for both options:

Input	Value
Year	2026, the car available to you all 365 days
Cost of the car (Option A), GST/HST and PST included	$48,000
Total kilometres	30,000
Business kilometres	22,000 (73.3%)
Personal kilometres, commuting included	8,000
Corporation requires you to use the car for the work	Yes
Operating costs	Paid by the corporation in Option A, by you in Option B
Your reimbursements to the corporation	None

Option A, the company car

Full standby charge. 365 ÷ 30 = 12.17, which rounds to 12. 2% × $48,000 × 12 = $11,520.

The reduction. Business use is 73.3%, more than half, and the corporation requires the use, so the reduced charge is available. B = 1,667 × 12 = 20,004. A is the lesser of 8,000 and 20,004, which is 8,000. $11,520 × 8,000 ÷ 20,004 = $4,607.08.

Operating expense benefit, fixed rate. 8,000 km × $0.34 = $2,720.00.

Operating expense benefit, elected. Business use is primarily for the work, so with written notice before December 31, 2026 you can elect half the standby charge: $4,607.08 ÷ 2 = $2,303.54.

Option A, 2026	Fixed rate	Half-standby election
Standby charge (reduced)	$4,607.08	$4,607.08
Operating expense benefit	$2,720.00	$2,303.54
Taxable benefit on your slip	$7,327.08	$6,910.62

With these inputs the election produces the smaller benefit. It will not always: the half-standby figure grows with the car's cost, the fixed rate grows with your personal kilometres, and which is lower depends entirely on those two numbers.

The same car when the driving changes

Keep everything above, but make the year 13,500 business kilometres and 16,500 personal (45% business). The car is no longer used primarily for the work, so neither the reduction nor the election is available.

Option A, 2026, 45% business	Amount
Standby charge (full, no reduction)	$11,520.00
Operating expense benefit, 16,500 km × $0.34	$5,610.00
Taxable benefit on your slip	$17,130.00

The standby charge did not move with the personal kilometres at all. Crossing the 50% line took it from $4,607.08 to $11,520, on the same car and the same 30,000 km.

Option B, your own car

Same 22,000 business kilometres, allowance paid at the 2026 prescribed amounts.

Option B, 2026	Amount
First 5,000 km × $0.73	$3,650.00
Next 17,000 km × $0.67	$11,390.00
Allowance paid to you, not included in your income if reasonable	$15,040.00
Taxable benefit on your slip	$0

Reading the two side by side

	Option A, company car	Option B, your own car
Who pays for the car and its running costs	The corporation	You
What the corporation deducts	Its car costs, within the section 7307 limits	The allowance, within the section 7306 amount
What is added to your income	$6,910.62 or $7,327.08 at 73% business	$0, if the allowance is reasonable
What moves your number	Cost of the car, days available, whether business use stays above half	Business kilometres

The table does not say which option is cheaper, and on these inputs alone it cannot. The comparison also depends on what the car and its running costs actually are, since in Option A the corporation carries them and in Option B you do out of the allowance, and on your own and the corporation's tax rates. What the arithmetic does show is where each option is sensitive: the company car to the purchase price and the 50% line, the allowance to the kilometres.

Why the log decides both options

In both options the number on your return is built from the log.

In Option A the personal kilometres are A in the standby formula, the whole base of the fixed-rate operating benefit, and the test for whether the reduction and the election are available at all. The CRA's guidance says an employee with an employer-provided automobile must keep a logbook or daily record, with the days the car was available and the business and personal kilometres, and give the employer a copy. Without records you must still be able to reasonably account for the personal and business kilometres to use the reduced standby charge. A year where you cannot show business use above 50% is a year charged at the full $11,520 in the example above.

In Option B the allowance is paid per business kilometre, so the kilometres are the payment. The CRA's guidance to the payer is that if no record is kept, the allowance is generally taxable.

Either way the log has to record each business trip with its date, destination, purpose and distance, and the odometer at the start and end of the year. The field-by-field list is in what a CRA logbook has to contain, and splitting a year into business and personal driving is covered in how to calculate your business-use percentage. Claimable Drive, in beta for iPhone, records drives in the background, lets you swipe each one business or personal, and keeps the start and end odometer readings.

FAQ

What is the standby charge on a company car? Under subsection 6(2) of the Income Tax Act, 2% of the car's cost for each 30-day period it is made available to you, or two-thirds of the lease payments (less insurance) if the corporation leases it. For an owned car available all year that is 24% of cost. It can be reduced only if the corporation requires you to use the car for the work, business use is more than half the distance, and your personal driving is below 1,667 km per 30-day period.

Where does the 20,004 km figure come from? It is B in the subsection 6(2) formula for a full year: 1,667 km multiplied by 12, because 365 days divided by 30 rounds to 12. When the reduction applies, the standby charge is multiplied by your personal kilometres over 20,004. Personal driving at or above 20,004 km in a full year gives no reduction.

What is the 34 cents per kilometre rate? The amount prescribed by section 7305.1 of the Income Tax Regulations for 2026 to value the operating expense benefit when the corporation pays the running costs of a car it provides. It is multiplied by your personal kilometres. It has nothing to do with an allowance for your own car, which uses the section 7306 amounts.

Can I choose half the standby charge instead of 34 cents a kilometre? Yes, if the car is used primarily for your employment duties and you tell the corporation in writing before the end of the year that you want that method. Otherwise the per-kilometre rate applies.

Is driving from home to my office personal in a company car? Yes. The CRA's automobile benefit guidance treats travel between home and a regular place of employment as personal driving, and personal kilometres are what the benefit is measured on.

Does the standby charge apply if I hold the car as a shareholder, not an employee? The value is computed the same way. Subsection 15(5) applies subsections 6(1), 6(1.1), 6(2) and 6(7) to a car a corporation makes available to a shareholder, reading "the employer" as "the corporation". The CRA has it reported on a T4A rather than a T4.

Can the corporation own the car and also pay me a per-kilometre allowance? No. The allowance is for the use of your own vehicle. A car the corporation owns or leases and makes available to you is an automobile benefit, measured by the standby charge and the operating expense benefit.

Sources

1. Income Tax Act, section 6, paragraph 6(1)(e) the standby charge, paragraph 6(1)(k) the operating expense benefit and the half-standby election, subsection 6(2) the reasonable standby charge formula and the 1,667 km reduction, subsection 6(7) taxes included in cost, and subparagraph 6(1)(b)(vii.1) reasonable per-kilometre allowances.
2. Income Tax Act, section 15, subsection 15(5), the automobile benefit to a shareholder computed on the section 6 rules.
3. Income Tax Act, section 18, paragraph 18(1)(r), the payer's deduction limit on an automobile allowance.
4. Income Tax Regulations, section 7305.1, the prescribed per-kilometre amount for the operating expense benefit.
5. Income Tax Regulations, section 7306, the prescribed amount for a per-kilometre allowance.
6. Income Tax Regulations, section 7307, the passenger-vehicle capital cost and lease limits.
7. Department of Finance Canada, Government Announces the 2026 Automobile Deduction Limits and Expense Benefit Rates for Businesses, January 14, 2026, the 34-cent operating benefit rate, the 73 and 67 cent allowance rates and the $39,000 Class 10.1 ceiling for 2026.
8. CRA, Automobile provided by the employer, what "made available" means, personal driving, the logbook requirement, the reduced standby charge conditions, what is included in cost, operating costs, the optional calculation, and T4 code 34 and T4A code 028 reporting.
9. CRA, Automobile or motor vehicle benefits, allowances or reimbursements provided to an employee for the use of their own vehicle, the conditions for a non-taxable allowance and the record requirement.
10. CRA Form RC18, Calculating Automobile Benefits, the CRA's worksheet for the standby charge and operating expense benefit.