This guide reflects the rules for the tax year ending December 31, 2025.
It applies to individuals filing their 2025 tax return in 2026.
If you use your vehicle for business, you may be eligible to deduct a portion of your vehicle expenses. This deep-dive guide explains how to calculate business-use percentage, what expenses are eligible, how to maintain a CRA-compliant mileage log, and how to claim Capital Cost Allowance (CCA) on your vehicle.
🧭 1. Who Can Claim Vehicle Expenses? #
You can claim vehicle expenses if:
- You use your vehicle to earn business income
- You track your business mileage
- You prorate personal vs. business use
Common examples:
- Driving to client meetings
- Delivering goods
- Traveling to job sites
- Picking up supplies
- Business-related errands
You cannot claim:
- Commuting from home to a regular workplace
- Personal trips
- Family errands
🚗 2. What Vehicle Expenses Are Eligible? #
You can deduct the business-use portion of:
✔ Operating expenses #
- Fuel
- Oil changes
- Repairs and maintenance
- Tires
- Car washes
- Parking fees
- Insurance
- License and registration fees
✔ Capital expenses #
- Lease payments (with limits)
- Capital Cost Allowance (if you own the vehicle)
✔ Interest on car loans #
Up to CRA limits.
❌ 3. What You Cannot Deduct #
You cannot deduct:
- Fines or tickets
- Personal-use portion of any expense
- Commuting costs
- Vehicle purchase price (unless using CCA)
- Luxury vehicle amounts above CRA limits
📘 4. Mileage Log Requirements (CRA-Compliant) #
CRA requires a detailed mileage log.
✔ Full logbook (first year) #
For each trip:
- Date
- Destination
- Purpose
- Starting odometer
- Ending odometer
- Total km
✔ Simplified logbook (future years) #
If your usage is consistent:
- Track business km for 3 months
- CRA extrapolates for the year
✔ Annual odometer readings #
Required every year.
🧮 5. How to Calculate Business-Use Percentage #
\[ \text{Business km} \div \text{Total km} \]Example:
- Business km: 8,000
- Total km: 20,000
You can deduct 40% of eligible vehicle expenses.
🧾 6. Example: Vehicle Expense Calculation #
Your annual vehicle expenses:
- Fuel: $3,000
- Insurance: $1,800
- Repairs: $1,200
- Parking: $300
- License/registration: $200
Total expenses:
\[ 3,000 + 1,800 + 1,200 + 300 + 200 = 6,500 \]Business-use percentage: 40%
Deduction:
\[ 6,500 \times 0.40 = 2,600 \]You can deduct $2,600.
🚘 7. Lease vs. Own: What’s Better? #
✔ If you lease #
You can deduct:
- Monthly lease payments (up to CRA limits)
- Operating expenses
✔ If you own #
You can deduct:
- CCA (depreciation)
- Operating expenses
CRA lease limit (2025): #
Approx. $950/month (subject to annual updates)
CRA vehicle cost limit for CCA: #
Approx. $36,000 + taxes (Class 10.1 rules)
🛠️ 8. Capital Cost Allowance (CCA) for Vehicles #
If you own your vehicle, you claim CCA instead of deducting the purchase price.
Common CCA classes: #
| Vehicle Type | CCA Class | Rate |
|---|---|---|
| Standard passenger vehicle | Class 10 | 30% |
| Luxury vehicle (> $36,000) | Class 10.1 | 30% |
| Zero-emission vehicle | Class 54 | 30% |
Half-year rule applies #
In the year of purchase, you can only claim 50% of the normal CCA.
🧮 9. Example: CCA on a Vehicle (Class 10) #
You buy a vehicle for $30,000 and use it 40% for business.
Year 1 (2025) #
\[ 30,000 \times 0.30 \times 0.5 = 4,500 \]Business portion:
\[ 4,500 \times 0.40 = 1,800 \]CCA deduction: $1,800
🅿️ 10. Parking and Tolls #
You can deduct:
- Parking fees for business trips
- Tolls for business travel
You cannot deduct:
- Parking at your home
- Parking at your regular workplace
- Parking tickets
🧾 11. Recordkeeping Requirements #
CRA requires:
- Receipts for all expenses
- Mileage log
- Annual odometer readings
- Lease agreements or purchase documents
- Insurance statements
Digital copies are acceptable.
❓ 12. Frequently Asked Questions #
Can I deduct commuting? #
No — commuting is personal.
Can I deduct 100% of my vehicle? #
Only if used 100% for business (rare).
Do I need a mileage log? #
Yes — CRA requires it.
Can I claim CCA and lease payments? #
No — one or the other.
Can I deduct parking tickets? #
No — fines are not deductible.
🔗 13. Related Guides #
- Self-Employment Expenses
- CCA for Self-Employed Canadians
- T2125 Step-by-Step Guide
- Business Use of Home (Deep Dive)
