Updated Checked by the Tax-Services.ca editorial team How we check
The CRA’s mileage rates for 2026 are 73 cents a kilometre for the first 5,000 kilometres you drive for work and 67 cents for every kilometre after that. In the territories the rates are 4 cents higher, 77 and 71 cents. They’re what an employer can use for a tax-free vehicle allowance, and they went up by a cent from 2025.
What are the CRA mileage rates for 2026 and 2025?
Here are both years next to each other, straight from the CRA’s page on automobile allowances.
| Where | Year | First 5,000 km | Each km after |
|---|---|---|---|
| Provinces | 2026 | 73 cents | 67 cents |
| Territories | 2026 | 77 cents | 71 cents |
| Provinces | 2025 | 72 cents | 66 cents |
| Territories | 2025 | 76 cents | 70 cents |
The 73 cents covers the first 5,000 kilometres, then the rate drops. It is a running total across the year, not a rate you get afresh on every trip.
How much is 8,000 kilometres worth?
Take an employee in Ontario who drives 8,000 business kilometres in 2026. The first 5,000 come to $3,650 (5,000 times 73 cents). The remaining 3,000 come to $2,010 (3,000 times 67 cents). The allowance is $5,660.
Push it to 12,000 kilometres and you get $3,650 plus $4,690, or $8,340. In Yukon, Nunavut or the Northwest Territories the 8,000-kilometre case is $3,850 plus $2,130, which is $5,980. Nothing fancy, just two multiplications.
A lighter year is even simpler. Dana in Winnipeg drives 4,000 business kilometres, all of them under the first rate, so it’s 4,000 times 73 cents, or $2,920. No second step needed.
Whatever your total, keep the log that goes with it. A log is what makes the number defensible when an employer, an auditor or you yourself later ask where it came from. A notebook in the glovebox works, or a phone app: date, where you went, why, and the kilometres.
Is the allowance taxable?
Not if it follows the CRA’s conditions.
The allowance may not be taxable if the per-kilometre rate is reasonable and all other conditions are met.
Automobile or motor vehicle allowances, canada.ca
The page lists them: the allowance is based only on business kilometres, the per-kilometre rate is reasonable, and the same use of the vehicle isn’t reimbursed twice. Use a rate lower or higher than the prescribed one and the CRA says it may not be considered reasonable.
A flat monthly allowance that isn’t tied to kilometres is taxable. So is a mix of a flat amount plus a per-kilometre rate for the same driving. And if no record of kilometres is kept, the allowance or reimbursement is generally taxable too. That last point catches people out. An employer can pay exactly the right rate and still create a taxable benefit for lack of a log.
What if my employer pays a different rate?
Ask why. A lower rate may leave you out of pocket for real costs. A higher rate could be treated as taxable. We couldn’t find a page that says exactly how much of a rate above 73 cents is taxed, so we won’t guess a number.
If the allowance is taxable, it lands on top of your pay and gets taxed like any other income, so your paycheque shrinks by the tax on it. The take-home pay calculator shows what a pay figure leaves you after tax, and the payroll deductions calculator splits out tax, CPP and EI.
Do these rates apply to my own business?
Careful here. The rates are set for allowances an employer pays an employee. If you run your own business and use your own car, a per-kilometre rate isn’t automatically how you claim it. We didn’t confirm the rule for a sole proprietor, so check the CRA’s guidance on motor vehicle expenses before you copy the 73 cents into a return. The self-employed tax calculator will show the effect of a deduction on your tax once you know the amount, though it lowers income tax and not CPP.
Employees who pay their own way and get nothing back are a separate case. What they may claim depends on rules we haven’t verified here.
What should I check on my own allowance?
Three quick questions settle most cases. Is the payment worked out per kilometre? Are the kilometres business ones only? Does someone keep the log? If all three are yes and the rate is the prescribed one or close to it, you’re probably in the clear. If the answer to any is no, ask your payroll department how the amount is treated on your T4.
Where we got these figures
All rates and conditions come from the Canada Revenue Agency‘s page on allowances and reimbursements for an employee’s own vehicle, which lists 2026 and 2025. The CRA sets the prescribed rates each year, and we found no 2027 figure. The tax effect of a taxable allowance comes from our 2026 calculators. We aren’t a government service and we don’t speak for one.
To see how a refund or balance owing shifts when income changes, use the tax refund calculator.
Frequently asked questions
What are the 2026 CRA mileage rates?
73 cents a kilometre for the first 5,000 km and 67 cents after that in the provinces. In the territories it's 77 and 71 cents.
What were the 2025 rates?
72 and 66 cents in the provinces, 76 and 70 cents in the territories.
When is a vehicle allowance taxable?
When it's a flat amount not based on kilometres, or when no record of business kilometres is kept. A rate the CRA doesn't consider reasonable may also be taxable.
Does the lower rate apply per trip?
No. The 73 cents covers the first 5,000 km, and the 67 cents applies after that.
Can I use these rates for my own business?
We didn't confirm that. The rates are for employer allowances, so check the CRA's motor vehicle expense guidance.
- How Canadian income tax works: brackets and credits
How federal and provincial Canadian income tax stack up, what marginal and average rates mean, and how credits and deductions change your bill