CRA Mileage Rate 2026: Why the Self-Employed Can't Use It

For 2026 the CRA per-kilometre rate is 73 cents for each of the first 5,000 kilometres and 67 cents for each kilometre after that. In Yukon, the Northwest Territories and Nunavut the 2026 rate is 77 cents and 71 cents.

Those are the numbers you came for. Here is the part the search result does not say: if you are self-employed, you cannot multiply your business kilometres by them and deduct the answer. Neither can an employee filing a T777. The rate is not a deduction anyone takes for their own driving. It is the ceiling on an allowance, a payment one person makes to another for the use of that other person's car, and a sole proprietor has nobody to pay them one.

This page gives the 2026 figures in full, explains what they are for, shows who can actually use them, and works one year of driving both ways so you can see how far apart the two answers can land.

The 2026 and 2025 rates

	2026	2025
Provinces, first 5,000 km	73 cents	72 cents
Provinces, each km after 5,000	67 cents	66 cents
Territories, first 5,000 km	77 cents	76 cents
Territories, each km after 5,000	71 cents	70 cents

The 2026 rates went up by one cent in every band. The first-5,000 tier counts the business kilometres an employee drives in the year, not per trip and not per month. The territorial rates apply to the kilometres actually driven in Yukon, the Northwest Territories or Nunavut, so a year split between a province and a territory is priced partly at each.

Why the regulation can show last year's rate

The rate lives in section 7306 of the Income Tax Regulations. The Department of Finance announces the next year's figure each December or January, and the regulation is amended to match later. The 2026 rates were announced on January 14, 2026, effective January 1, 2026, so the regulation's text trails the announcement and can still print the 2025 amounts (66 cents per kilometre plus a 6-cent uplift on the first 5,000, which is 72 and 66, plus 4 cents in the territories).

That lag is normal and it does not make the announced figure unofficial. The announcement is what the CRA administers for the year it covers, and the CRA's employer page on allowances lists the rate by year.

What the rate actually is

Read section 7306 and it tells you who it is for. It opens "for the purposes of paragraph 18(1)(r) of the Act", and paragraph 18(1)(r) is a limit on what a payer may deduct: an allowance paid for the use of an automobile is not deductible to the extent it exceeds the prescribed amount, unless the excess is included in the recipient's income.

So the rate does two jobs, both on the payer's side of the transaction:

1. It caps the payer's deduction. An employer paying an allowance can deduct it up to the prescribed amount.
2. It is the CRA's usual benchmark for "reasonable". Under subparagraph 6(1)(b)(vii.1) of the Income Tax Act, a reasonable allowance for the use of a motor vehicle is not taxable to the employee. The CRA's position is that it generally considers an allowance at the section 7306 rates reasonable. The Act also deems an allowance unreasonable if it is not based solely on the kilometres driven for work, or if the employer also reimburses the same use of the car.

Nothing in that describes a person claiming kilometres times a rate for their own vehicle. The rate governs a payment between two parties.

Why a sole proprietor cannot use it

A sole proprietorship is not a separate person from you. Money moving from the business to you is a draw, not an allowance, and there is no employer on the other side to deduct anything or to pay you tax free.

What you deduct instead is your actual vehicle costs multiplied by your business-use percentage, which is business kilometres divided by total kilometres for the year. The CRA's own worked example on the T2125 page does exactly this: 27,000 business kilometres over 30,000 total, times $5,400 of van expenses, gives a deduction of $4,860. The costs that go into it are fuel, maintenance and repairs, insurance, licence and registration, loan interest or lease payments, and capital cost allowance on a car you own, each with its own CRA limits where they apply. Business parking and supplementary business insurance are deducted in full rather than by the percentage.

A partner in a partnership does the same arithmetic on their own car and claims it on line 9943 of the T2125, as an amount deductible from their share of the partnership's income. The vehicle expense guide walks through each cost category.

Why a T777 employee cannot use it either

An employee whose contract requires them to pay their own car expenses, with a T2200 signed by the employer, claims on Form T777. It is the same arithmetic as the T2125: actual costs times the share of kilometres driven for work.

Two conditions on that route matter here. You cannot claim if you received a non-taxable allowance for motor vehicle expenses, and you are not treated as having paid your own expenses if you refused a reimbursement or a reasonable allowance your employer offered. The rate belongs to the employer's decision about what to pay you. Once you are filing a T777, it has no role in your claim.

The same year, worked both ways

One driver, one year: 12,000 business kilometres out of 20,000 total, all in a province, all in 2026. The business-use percentage is 12,000 ÷ 20,000 = 60%.

What the 2026 rate would have produced

Band	Kilometres	2026 rate	Amount
First 5,000 km	5,000	73 cents	$3,650
Each km after 5,000	7,000	67 cents	$4,690
Total	12,000		$8,340

5,000 × 0.73 = 3,650, and 7,000 × 0.67 = 4,690, which sum to $8,340. That is what an employer could pay this driver as a tax-free allowance for 2026, and what it could deduct for paying it. At the 2025 rates the same kilometres come to 5,000 × 0.72 + 7,000 × 0.66 = $3,600 + $4,620 = $8,220.

What a self-employed driver actually deducts

The answer depends entirely on the car. Take an older car, owned outright. No loan, and assume it has no capital cost allowance left worth claiming.

2026 cost	Amount
Fuel	$2,600
Insurance	$1,800
Maintenance and repairs	$900
Licence and registration	$150
Total	$5,450

$5,450 × 60% = $3,270. That is $5,070 less than the $8,340 the rate would have given. This is the driver who searches for the rate, multiplies, and is disappointed, or worse, claims the $8,340.

The gap does not always run that way. A newer car adds capital cost allowance and, if it is financed, loan interest to the costs being prorated, and those can carry the actual-cost deduction past what the rate would have paid. The rate is neither a floor nor a ceiling on what you deduct; it is simply not part of the calculation.

What the comparison tells you

Neither number is the "better" one for a sole proprietor, because only one of them is available. The rate is a flat estimate of what driving costs on average. Your actual costs are what your car costs. For a cheap, paid-off car the rate would look generous; for an expensive, financed one it can look stingy. The mileage rate calculator runs both side by side on your own kilometres and costs, and shows which route fits the situation you describe.

Who can use the rate

• An employer paying an employee an allowance for driving the employee's own car for work. The allowance is deductible to the employer up to the prescribed amount, and tax free to the employee when it is based only on work kilometres, reasonable, and not doubled up with a reimbursement for the same driving.
• An employee receiving that allowance. You do not claim it, you receive it, and a non-taxable allowance does not go on your return at all. What you give up is the T777 vehicle claim for the same car.
• An incorporated owner-manager. Your corporation is a separate person and you are its officer or employee, so it can pay you a per-kilometre allowance for your own car on the same terms. The conditions, the records the corporation has to hold, the year-end true-up and the GST/HST it can claim back are covered in paying yourself a per-kilometre allowance from your own corporation.

In every one of those cases the allowance is paid on actual business kilometres, so the log has to record each trip. What a CRA logbook has to contain is the same whichever side of the line you are on. Claimable Drive, our mileage logbook, in beta for iPhone, records drives in the background and works out the business-use percentage from the ones you mark as business.

FAQ

What is the CRA mileage rate for 2026? 73 cents per kilometre for the first 5,000 kilometres and 67 cents for each kilometre after that. In Yukon, the Northwest Territories and Nunavut the 2026 rate is 77 cents and 71 cents. The 2025 rates were 72 and 66 cents, and 76 and 70 in the territories.

Can I use the CRA mileage rate if I am self-employed? No. The rate is the ceiling on an allowance one person pays another, and a sole proprietor or partner has no one paying them an allowance. You deduct your business-use percentage of your actual vehicle costs on the T2125.

Is the 2026 rate official if the regulation shows the 2025 amounts? Yes. The Department of Finance announced the 2026 rate on January 14, 2026, effective January 1, 2026, and the CRA administers it from that date. Section 7306 is amended to match afterward, so its text can still show the 2025 amounts while the 2026 rate applies.

Can I claim 73 cents a kilometre on a T777 as an employee? No. An employee with a signed T2200 deducts actual costs times the share of kilometres driven for work, the same arithmetic as the T2125. If your employer paid you a non-taxable per-kilometre allowance, you cannot also claim motor vehicle expenses on a T777.

What is the 34 cents per kilometre rate? A different number for a different situation. The 34-cent rate for 2026 is used to value the taxable benefit when an employer pays the personal-use operating costs of a car the employer provides. It has nothing to do with an allowance for your own car, and nothing to do with a self-employed deduction.

Is it better to be paid the rate or to claim actual costs? Most people do not get to pick: the route is decided by whether someone is paying you an allowance. Where the numbers are compared, it depends on the car. At 12,000 business kilometres the 2026 rate produces $8,340, while the older paid-off car above supports a $3,270 deduction; a newer financed car, with capital cost allowance and interest in its costs, can come out ahead of the rate.

Sources

1. Income Tax Regulations, section 7306, the prescribed per-kilometre amount for the purposes of paragraph 18(1)(r), including the 5,000 km band and the territorial supplement.
2. Department of Finance Canada, Government Announces the 2026 Automobile Deduction Limits and Expense Benefit Rates for Businesses, January 14, 2026, the 2026 allowance rates for the provinces and the territories and the 34-cent operating benefit rate.
3. Income Tax Act, section 18, paragraph 18(1)(r), the payer's deduction limit on an automobile allowance.
4. Income Tax Act, section 6, subparagraph 6(1)(b)(vii.1), reasonable motor vehicle allowances received by an employee, and the rules in 6(1)(b)(x) and (xi) that deem an allowance unreasonable.
5. 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, the CRA's position that the section 7306 rates are generally reasonable, and its table of rates by year.
6. CRA, Motor vehicle expenses (sole proprietorships and partnerships), Chart A on the T2125 and line 9943 for a partner's own vehicle.
7. CRA, Calculating motor vehicle expenses, the business-use proration and the worked example, with parking and supplementary business insurance deducted in full.
8. CRA, Line 22900, Other employment expenses, the T2200 conditions for an employee's vehicle claim, the non-taxable allowance bar and the refused-allowance rule.