Updated Checked by the Tax-Services.ca editorial team How we check
A business car write off in Canada isn’t a single deduction. You claim the business share of running costs, plus capital cost allowance (CCA) on the price of the car, and the CRA caps the price it will recognize at $39,000 before tax for a passenger vehicle bought in 2026. If you drive 90% for work, you deduct 90% of the costs, not the whole car.
Which costs can you deduct on a business car?
The CRA lists fuel and oil (or electricity for a zero-emission vehicle), insurance and registration, maintenance and repairs, interest on a car loan, leasing costs and CCA. Parking that relates to your business is fully deductible. Everything else works by proportion: business kilometres divided by total kilometres, times the expense.
The CRA’s own example is 27,000 business kilometres out of 30,000. That’s 90%, so 90% of the year’s costs are deductible.
What are the 2026 limits?
The federal Department of Finance announced these figures for 2026. All are before tax, and they apply to cars bought or leased on or after the stated date.
| Item | 2026 limit |
|---|---|
| Passenger vehicle cost ceiling (class 10.1), from January 1, 2026 | $39,000 |
| Zero-emission vehicle ceiling (class 54) | $61,000 |
| Deductible interest on a car loan | $350 per month |
| Deductible lease cost | $1,100 per month |
| Tax-exempt allowance, provinces (first 5,000 km, then after) | 73 cents, then 67 cents per km |
So if you buy a $55,000 gas car, the CRA still treats it as a $39,000 car for CCA. The rest of the price gets no deduction. That’s a big difference for anyone picturing a full write off.
What does it save in tax?
Take a self-employed person in Ontario with $60,000 of net business income. Say their car costs for the year come to $9,000 and 90% is business use, so $8,100 is deductible. That takes net income to $51,900.
In the self-employed tax calculator, income tax on $60,000 is $7,879.42 and on $51,900 is $6,414.57, a saving of $1,464.85. CPP falls too, from $6,723.50 to $5,759.60, since it’s charged on net business income. In total that’s about $2,429 less, on $8,100 of deductions. It’s a discount of roughly 30 cents per dollar, not the whole amount.
The engine’s numbers are estimates and leave out GST/HST and EI. To see your own rate on the next dollar, use the marginal tax rate calculator.
What records will the CRA want?
A logbook. For each trip write down the date, the destination, the reason and the kilometres driven, and record the odometer at the start and end of the fiscal year. The CRA allows a shortcut once you’ve kept a full 12-month log: in later years a three-month sample can be enough, as long as your use stays within 10% of the base year.
Keep the receipts too. You can’t reconstruct a year of fuel from memory in an audit.
Mistakes with a business car
Deducting 100% when the car is also your family car is the classic one. Others: forgetting the interest cap ($350 a month) on a big loan, and claiming the full price of an expensive car. Before you buy, run the payments through the car loan calculator, and check that the business use will really be high enough to justify it.
We didn’t confirm how the first-year CCA rules work in 2026, or whether GST/HST input tax credits apply to your car, so check the CRA’s CCA page and your own registration before you count them.
Where the numbers come from
The 2026 limits come from the Department of Finance Canada’s January 2026 announcement. The rules on records, expenses and splitting come from the CRA’s motor vehicle expenses page. The tax savings are our engine’s estimates for Ontario in 2026. This site isn’t affiliated with the CRA.
Frequently asked questions
Can I write off 100% of my car?
Only if you use it only for business. Otherwise you deduct the business share, worked out from business kilometres over total kilometres.
What is the 2026 cost ceiling for a passenger car?
$39,000 before tax for class 10.1, for vehicles acquired on or after January 1, 2026.
Is there a limit on car loan interest?
Yes. The Department of Finance sets it at $350 per month for 2026.
Do I need a logbook?
Yes. Record date, destination, purpose and kilometres for each trip. After a full 12-month log, a three-month sample can do if use stays within 10%.
How much tax does a car deduction save?
It depends on your rate. In our Ontario example, $8,100 of deductions cut income tax by $1,464.85 and CPP by $963.90.
All family and benefits calculators
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST
Information only. This page is general information, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns or offer tax services, and we have no connection with the CRA, Revenu Québec, any government or any company named on this page. Check the figures that matter with an official source or a qualified professional.