2026 automobile deduction limits and allowance rates
The per-kilometre allowance, vehicle cost ceilings, and taxable benefit rates for 2026, and where each one shows up in your books.
Finance Canada sets the limits on how much a business can deduct for passenger vehicles, and the rates for tax-free mileage allowances and employee vehicle benefits. Two went up for 2026; the rest stayed the same.
The 2026 numbers
| Limit or rate | 2026 |
|---|---|
| Tax-exempt allowance, first 5,000 km (provinces) | 73¢/km |
| Tax-exempt allowance, each additional km (provinces) | 67¢/km |
| CCA ceiling, Class 10.1 passenger vehicles | $39,000 |
| CCA ceiling, Class 54 zero-emission vehicles | $61,000 |
| Deductible lease costs | $1,100/month |
| Deductible interest on a vehicle loan | $350/month |
| Operating cost benefit rate | 34¢/km |
| Operating cost benefit rate (auto sales and leasing) | 31¢/km |
Paying employees for kilometres
If employees use their own vehicles for work, you can pay them a per-kilometre allowance. The limit on the deduction for tax-exempt allowances rose by one cent for 2026: 73 cents per kilometre for the first 5,000 kilometres and 67 cents for each kilometre after that.
Keep a mileage log for each employee. The kilometres claimed are what support the allowance if it is ever reviewed.
Buying, leasing, or financing a vehicle
- 01Buying. For Class 10.1 passenger vehicles acquired on or after January 1, 2026, the capital cost you can depreciate is capped at $39,000 before tax, up from $38,000. Zero-emission passenger vehicles (Class 54) stay at $61,000.
- 02Leasing. Deductible lease costs stay at $1,100 a month before tax for new leases entered into on or after January 1, 2026.
- 03Financing. The maximum interest deduction stays at $350 a month for new vehicle loans entered into on or after January 1, 2026.
Company cars and taxable benefits
If you pay the operating costs of a vehicle an employee also uses personally, the personal portion is a taxable benefit. For 2026 it is calculated at 34 cents per kilometre of personal driving, unchanged from 2025. For employees whose main job is selling or leasing automobiles, the rate stays at 31 cents.
This summary is general information only, not tax advice. Vehicle deductions depend on how the vehicle is classified and used; confirm with your accountant before you buy or lease.
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