Your vehicle deduction is the business-use share of your real car costs. Divide business kilometres by total kilometres, then multiply by your fuel, maintenance, insurance, and licence — plus loan interest and depreciation if you own, or lease payments if you lease. There is no flat per-kilometre deduction for the self-employed; you report actual costs on Form T2125, line 9281. The 2026 limits — $350/month interest, $1,100/month lease — are handled for you.
Your business use is 60% — a logbook is the only proof the CRA accepts.
Interest is capped at $350/month ($4,200 here). Use the CCA calculator for the depreciation figure.
You can deduct
$4,872
60% business use of $8,120 in eligible vehicle costs.
Benchmark only: at the CRA reasonable per-km rate (73¢ first 5,000 km, 67¢ after), your 12,000 business km would be about $8,340. Self-employed people can't use a flat per-km deduction — you report actual costs — but this is a useful sanity check.
On Form T2125 this is line 9281 — Motor vehicle expenses (not including CCA); capital cost allowance goes in Area A. A passenger vehicle costing more than $39,000 (before tax) is a special Class 10.1 — see the CCA calculator.
Estimate only, using the 2026 CRA limits. Real leasing deductions can be further reduced by a manufacturer's-list-price formula, and parking & supplementary business insurance are fully deductible on top. Not tax advice — see the Sources below and confirm with a Canadian accountant.
Every kilometre, already logged.
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A worked example
Say you own your car and drove 12,000 business km out of 20,000 total — that's 60% business use. Your annual costs are $3,000 fuel, $1,200 maintenance, $1,800 insurance, and $120 licence, plus $2,000 of loan interest (under the $4,200 annual cap).
So you deduct $4,872 on line 9281. If you'd instead received the CRA reasonable allowance, your 12,000 business km would be worth about $8,340 — a useful gut-check that your real-cost claim is in a sensible range.
Sources
Every rule and 2026 figure in this calculator is drawn directly from the CRA and the Department of Finance, verified against the live pages below:
- CRA — Calculating motor vehicle expenses (Form T2125)
The business-km ÷ total-km method, the logbook requirement, and Chart A.
- CRA — Motor vehicle expenses (not including CCA), line 9281
The eligible operating costs and where they are reported on T2125.
- Department of Finance — 2026 Automobile Deduction Limits
The 2026 figures: $350/month interest cap, $1,100/month lease cap, 73¢/67¢ per-km rates, and the $39,000 Class 10.1 ceiling.
- CRA — Guide T4002, Chapter 3: Expenses
The full self-employed expenses guide behind Form T2125.
Keep going
Read the full guide to claiming vehicle expenses, work out the depreciation with the capital cost allowance calculator, add your home office deduction, then size your monthly CRA jar with the tax set-aside calculator. New to all this? Start from the complete guide to self-employed taxes in Canada.
People also ask
How do I calculate business use of my vehicle in Canada?
Divide the kilometres you drove to earn business income by the total kilometres you drove all year. If you drove 12,000 business km out of 20,000 total, your business use is 60%. You then deduct that percentage of your real vehicle costs — fuel, maintenance, insurance, licence, and (if you own) loan interest and capital cost allowance, or (if you lease) your lease payments. The only proof the CRA accepts for the ratio is a logbook.
Can self-employed people deduct a flat per-kilometre rate in Canada?
No. The 73¢/67¢ per-kilometre figure is the "reasonable allowance" rate an employer can pay an employee tax-free — it is not a deduction a sole proprietor can claim. Self-employed people report actual vehicle costs on Form T2125 and prorate them by business use. The per-km number is still a handy sanity check, which is why this tool shows it alongside your real deduction.
What vehicle expenses can a self-employed Canadian deduct?
Fuel, maintenance and repairs, insurance, licence and registration, and other running costs like car washes — all prorated by business use. If you own the vehicle you can also deduct loan interest (capped at $350 per month for 2026) and capital cost allowance (depreciation). If you lease, you deduct the lease payments instead (capped at $1,100 per month for 2026). Parking for business and supplementary business insurance are fully deductible on top, without proration.
How much car loan interest can I deduct in 2026?
For 2026 the CRA caps deductible interest on a loan to buy a passenger vehicle at $350 per month, so at most $4,200 for a full year — and you still only deduct the business-use share of that. This limit applies to loans entered into on or after January 1, 2026 and is set each year by the Department of Finance.
Is leasing or buying better for the deduction?
It depends. A lease lets you deduct payments up to $1,100 per month (before tax) for 2026, which is often simpler and front-loads the deduction. Buying lets you deduct loan interest (up to $350/month) plus capital cost allowance, which spreads out over years. For an expensive car, the buying route is limited by the $39,000 Class 10.1 ceiling. Run both in this tool and the CCA calculator to compare.
Where do vehicle expenses go on the tax return?
Operating costs, interest, and lease payments go on line 9281 of Form T2125, "Motor vehicle expenses (not including CCA)". Capital cost allowance (depreciation) is calculated separately in Area A of the same form. Net business income then flows to line 13500 of your T1 return.
Every deduction, ready in April.
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