Updated on 16 June 2026

If you have a personal vehicle you use for work, you may be entitled to certain mileage rate benefits from your employer. You will incur these costs from professional roles requiring constant movement and personal vehicle use.

Under Canadian tax rules, a reasonable per-kilometre automobile allowance from your employer may be non-taxable if it meets the applicable CRA conditions. When calculating your allowance, the number of business kilometres driven will be used to determine the total amount based on the applicable per-kilometre rate.

Since every country has its own calculation metrics, you want to work closely with an experienced professional who understands the inner workings of distance rates. They help you make accurate calculations and present valid claims to your employer.

If you are the employer in question, it is also useful to know the mileage rate to be able to reimburse your employees fairly. In exchange, you gain more control over your business expenses, promoting stability and better operation. Additionally, reasonable automobile allowances paid to employees for business-related travel may generally be deductible as business expenses, subject to applicable tax rules.

What's New in 2026?

• The CRA prescribed automobile allowance rates increased by 1 cent per kilometre in 2026. For employees using their personal vehicles for employment-related travel in the provinces, the rate increased from 72 to 73 cents per kilometre for the first 5,000 kilometres and from 66 to 67 cents for each additional kilometre.
• In the Northwest Territories, Yukon, and Nunavut, the rates also increased by 1 cent. The 2026 rates are 77 cents per kilometre for the first 5,000 kilometres and 71 cents for each additional kilometre.
• These changes took effect on January 1, 2026. The prescribed rates generally serve as a benchmark for determining whether a per-kilometre automobile allowance paid by an employer is reasonable for tax purposes.

Categories of Parties Eligible for CRA Mileage Rate 2026 Claims

Canadian law and tax provisions allow deductions for employees who use transportation for business purposes. Among the modes of transport considered include trains, self-driving, airplanes, and cabs, all of which must be used within the scope of employment.

If you are a taxpayer who uses your personal automobile for business travel, you might be able to get an automobile allowance from your employer. Your employer might check the prescribed per-kilometre rates for 2026 and the CRA guidelines to see if the allowance is reasonable for tax purposes. So you want to work with someone with experience, who understands the importance of identifying the right rate so you can learn about the benefits of your particular rate.

Notably, the automobile allowance rules discussed here apply specifically to the use of your personal vehicle for employment-related travel. Other forms of business transportation, such as cabs, may be subject to different reimbursement and deduction rules.

On the other hand, automobile allowances generally do not cover expenses related to your daily commute between home and your regular place of work. Ordinary commuting is generally considered personal travel rather than employment-related travel.

How to Determine Business Mileage Rate

Establishing the scope of business involves working through multiple grey areas, as day-to-day business operations vary. However, employees should distinguish employment-related travel from personal travel when calculating business mileage.

Firstly, the trip you undertake must be related to your employment duties. Employers may require employees to document the purpose of the trip and the number of business kilometres driven when calculating a per-kilometre automobile allowance.

Sometimes travel is not deemed to be work-related. This can be the case if the travel is personal in nature, or is ordinary commuting to and from your home and your usual place of work.

Secondly, your business distance range must strictly relate to the intended business purpose and nothing else. Usually, unforeseen circumstances may arise and lead you to make detours during a business journey.

If you make a detour for personal reasons during a business journey, the additional personal kilometres should not be included in your business mileage. Instead, you should calculate the kilometres driven for employment-related purposes to ensure accurate mileage records. Additional travel for personal purposes falls solely the employee's responsibility.

Examples of activities that may fall within the scope of employment-related travel include:

1. Transporting company supplies.
2. Attending a business meeting.
3. Running company errands.
4. Attending a meeting with your manager at a different company location.

If your employer approves mileage calculations for other employment-related travel, they can also include them in the total considerations. However, every kilometre covered may be subject to review, so employees should maintain records of their employment-related travel when receiving automobile allowances.

Mileage Rate 2026 for Self-Employed Parties

Working with independent contractors is increasingly becoming a viable option for many business owners, making it necessary to consider their business-related vehicle expenses as well. An independent contractor works under a specific contract for services, and the agreement concludes upon delivery of the said goods or services.

Since independent contractors are not employees, the CRA-prescribed per-kilometre automobile allowance rates for employees do not automatically apply to them. Self-employed individuals may generally deduct eligible motor vehicle expenses incurred to earn business income, based on the portion of vehicle use related to their business.

Some business-related journeys may include:

1. Purchasing and Collecting Business Supplies

If a self-employed individual travels to purchase or collect supplies required for their business, the kilometres driven may form part of their business vehicle use. Eligible motor vehicle expenses may generally be deducted based on the business-use portion of the vehicle, subject to CRA rules and proper recordkeeping.

2. Traveling to Different Work Sites

Additionally, if a self-employed individual needs to travel between different work sites to conduct business, this travel may qualify as business use of the vehicle. They should maintain records of their business kilometres and vehicle expenses to support any deduction claimed.

3. Meeting with Clients

Travel to meet clients for business purposes may also qualify as business vehicle use. Self-employed individuals should keep records of the kilometres driven for these trips and calculate their deductible motor vehicle expenses according to the applicable CRA rules.

How to Calculate Mileage Rates in Canada

As mentioned, the CRA provides guidance on prescribed per-kilometre automobile allowance rates in Canada. These rates are updated annually and may vary from year to year depending on applicable tax rules and economic conditions.

The 2026 prescribed per-kilometre rate is 73 cents for the first 5,000 kilometres driven for employment-related purposes and 67 cents for every kilometre afterward. In the Northwest Territories, Yukon, and Nunavut, an additional 4 cents per kilometre applies, bringing the rates to 77 cents for the first 5,000 kilometres and 71 cents for every additional kilometre.

The 5,000-kilometre threshold determines which prescribed per-kilometre rate applies when calculating a reasonable automobile allowance. The higher rate applies to the first 5,000 employment-related kilometres, while the lower rate applies to kilometres driven beyond that threshold.

For employers, these prescribed rates provide a benchmark for determining whether a per-kilometre automobile allowance is reasonable for tax purposes. A reasonable allowance that meets the applicable CRA conditions may generally be non-taxable to the employee, while qualifying automobile allowances paid for business-related travel may generally be deductible by the employer as a business expense.

CRA Automobile Rates for the Last 7 Years

Important: In the Northwest Territories, Yukon, and Nunavut, an additional 0.04 CAD per kilometre applies to the prescribed rates.

Conclusion

If you want to know how to calculate business mileage in 2026 in Canada, you need to know the CRA rules and the prescribed per-kilometre rates. With the right information, you are best placed to calculate employment-related automobile allowances correctly. Business owners can also benefit by working with an accountant to ensure automobile allowances and reimbursements are properly treated for tax purposes, and that eligible business expenses are deducted correctly.

FAQs

1. Does an Employer Have to Reimburse Their Employees for CRA Mileage?

There is no general federal requirement that automatically requires every employer to reimburse employees at the CRA-prescribed per-kilometre rates. Whether an employee is reimbursed for using a personal vehicle for work may depend on the employment agreement, workplace policies, and other applicable requirements. The CRA prescribed rates are primarily used as a benchmark for determining whether a per-kilometre automobile allowance is reasonable for tax purposes.

2. What Are the CRA Mileage Rates in Canada in 2026?

For 2026, the prescribed rate is 73 cents per kilometre for the first 5,000 kilometres driven for employment-related purposes and 67 cents per kilometre for each additional kilometre. In the Northwest Territories, Yukon, and Nunavut, an additional 4 cents per kilometre applies, bringing the rates to 77 cents and 71 cents, respectively.

3. Are Mileage Reimbursements Submitted Through Payroll?

The payroll treatment depends on the type of payment and whether it is considered taxable or non-taxable under CRA rules. A reasonable per-kilometre automobile allowance that meets the applicable CRA conditions may generally be non-taxable and does not need to be included in the employee's income. However, an allowance that does not meet CRA requirements may be considered a taxable benefit and generally must be included in the employee's income and reported accordingly.

4. Is the CRA Mileage Rate Mandatory for Employers?

No. The CRA prescribed per-kilometre rate is not a mandatory reimbursement rate that every employer must pay. Instead, it provides a benchmark that is generally considered reasonable for tax purposes. Depending on the circumstances, a different rate may also be considered reasonable. Employers should ensure that their automobile allowance policies comply with applicable tax and employment requirements.

5. Can Self-Employed Individuals Use the CRA Mileage Rate to Claim Vehicle Expenses?

Self-employed individuals generally calculate deductible motor vehicle expenses based on the portion of their actual vehicle expenses that relates to earning business income, rather than simply applying the CRA-prescribed employee automobile allowance rate. They should maintain records of business and total kilometres driven, as well as supporting documentation for eligible vehicle expenses, to calculate and support the business-use portion of their deduction.