Current Mileage Rates for Canada (2025)

Tracking and deducting vehicle expenses for businesses

If you own a business in Canada and your employees use their personal vehicles for work, you can reimburse them for incurred car-related expenses. These reimbursements may be tax-free as long as they follow the standard mileage rate for the current year.

For 2025, these rates are different for provinces and territories. In the provinces, you can reimburse employees tax-free at the rate of 72 cents per mile for the first 5,000 kilometres and 66 cents for each additional kilometre.

In the territories, the allowance rate is 76 cents per kilometre for the first 5,000 kilometres driven, and 70 cents for each additional kilometre.

That means if you reimburse your employees for vehicle expenses, you need them to track work mileage throughout the year, noting down total kilometres, destinations, and purpose of each drive. 

By far the easiest way to accomplish that is with a mileage tracking app like MileIQ — your drivers won’t need to remember to record a drive because MileIQ tracks trips automatically. And best of all, no one needs to fill out a spreadsheet. MileIQ generates mileage reports with a tap for drivers to share and for you to review in a single dashboard. 

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Company car deductions and expenses

If you own company vehicles, you can claim vehicle expense deductions, including capital cost allowances (CCA). 

For class 10.1 passenger vehicles, the limit for CCA in 2025 is $38,000, before tax, for vehicles (new and used) acquired on or after January 1, 2025. That means the maximum amount you can claim for a purchased vehicle is $38,000. 

For zero-emission passenger vehicles (class 54), the CCA limit is $61,000 in 2025. 

If you’re paying off a car loan you may also deduct up to $350 of the interest paid on your business tax return. 

If you lease a vehicle for your business, you may also deduct a portion of the leasing fees, up to $1,100 per month, before tax, for new leases entered into on or after January 1, 2025.

Tracking and deducting vehicle expenses for self-employed

As a small business owner or a solopreneur in Canada, you can deduct business-related vehicle expenses on your tax return. However, if like many small business owners you use one car for personal and business drives, you can only deduct the business percentage of your expenses. Here are some examples of the the types of expenses you can deduct:

• Licence  and registration fees
• Cost of fuel
• Maintenance (oil changes, check ups)
• Repairs 
• Auto insurance premiums
• Interest on auto loan
• Leasing costs
• Electricity cost of charging a zero-emissions vehicle

You may also deduct 100% of business-related parking fees and the cost of supplementary business insurance on a motor or passenger vehicle. 

In order to calculate business use percentage of your vehicle expenses, you need to diligently track all mileage throughout the year. That includes differentiating between business and personal trips, and noting down dates, locations, and purpose of each drive. 

If you drive for your business more than a couple times a year and attempt to track all this data by hand, you’ll probably find yourself missing a few trips here and there. It’s easy to forget!

Most people who need to track mileage for work use an app like MileIQ. It tracks every kilometre automatically, there’s no need to press start or stop, and you can classify drives as business or personal with a swipe.

Deducting vehicle-related expenses in Canada: Sample calculation

If you tracked your total and business mileage throughout the year, you can use it to figure out the business use percentage deductible on your taxes. 

Let’s say you drove 25,000 kilometres this year and 15,000 of them were for business-related drives. 

You also kept records of all your vehicle expenses throughout the year, including registration fees, gas, maintenance, and insurance costs:

• Registration fees: $100
• Interest paid: $1,000
• Insurance: $2,000
• Gas: $3,000
• Maintenance and repairs: $250

You can add up all the above costs and use the business mileage percentage to calculate your tax deduction: 

15,000 km/25,000 km = 0.6 or 60% which is your business use percentage.

06 x $6,350 (your total vehicle expenses) = $3, 810

If you have say, $200 worth of business parking expenses, you may add them to this business use number: $33,810 + $200.

That means the maximum amount you can claim on your taxes for vehicle expenses is $4,010.

Make sure you hold on to all documentation, including mileage reports, invoices, and receipts in case the CRA asks for proof of your expenses.