CRA reasonable per-kilometre allowance 2026: 72¢ / 66¢ explained
The Canada Revenue Agency reasonable per-kilometre rate for 2026, with the +4¢ northern uplift.
The 2026 rate
For 2026, the CRA's reasonable per-kilometre allowance — the maximum amount that an employer can pay an employee for business use of their personal vehicle without triggering tax for the employee — is:
- **72¢ per kilometre** for the first 5,000 km of employment-related driving in the calendar year. - **66¢ per kilometre** for each additional kilometre above 5,000. - **Add 4¢/km** if the driving takes place in the Yukon, Northwest Territories or Nunavut.
The rate is updated annually by the Department of Finance and published in CRA Information Circular IT-522R.
Why "reasonable"
CRA doesn't fix a single mandatory rate; it defines what's "reasonable".[^cra-rates-84] Within the published rate, the allowance is fully tax-free to the employee and fully deductible to the employer. Above it, the excess is treated as taxable employment income, reported on the T4 slip in box 14, and subject to Income Tax, CPP and EI deductions.
Conditions for the allowance to be tax-free
The CRA requires three conditions:
1. The allowance is **based solely on the number of kilometres** driven for business (not a flat monthly amount). 2. The rate is **reasonable** (within the per-km figures above). 3. The employee is **not also reimbursed** for the same vehicle expenses (a fuel card on top of an allowance, for example, is generally taxable).
Flat monthly car allowances ($500/month, regardless of driving) are always taxable: they fail condition 1.
Province-by-province nuances
The federal CRA rate applies country-wide for federal Income Tax. **Quebec** has a parallel system administered by Revenu Québec. The QPIP/QPP withholding rules differ slightly, but the per-km rate aligns with CRA. Always check Revenu Québec guidance separately for any Quebec-specific deductions on Form TP-1 instead of T1.
What "employment-related" means
Included: travel between work locations, to a client site, to a temporary work location, and from one client to another within the workday.
Excluded: travel from home to your regular place of employment (commuting). Travel from home to a temporary workplace can be eligible if certain conditions are met.
Documentation
CRA requires a logbook for at least the first full year of business use. After that, a representative 3-month sample logbook taken in the same period of a subsequent year may be used to extrapolate, provided the pattern stays within 10% of the base year. The logbook must show:
- Date of trip - Destination - Purpose of trip (business reason) - Kilometres driven
Digital logbooks (apps with GPS capture) are acceptable as long as data is contemporaneous and tamper-evident.
Simplified vs detailed for self-employed
Unincorporated self-employed taxpayers in Canada use the actual-cost method (not a flat per-km method): they prorate fuel, insurance, lease/depreciation, maintenance, and licences by the business-use percentage from the logbook. There is no AMAP-equivalent simplified method for sole proprietors at the federal level.
Bottom line for 2026
72¢ for the first 5,000 km / 66¢ thereafter is the standard. Stay at or below it, log every trip, and you keep the allowance tax-free for employees and deductible for the employer.