The CRA Mileage Rate, Explained (and Why It Might Not Apply to You)
Every year, thousands of Canadians search for "the CRA mileage rate," find a number around 70 cents per kilometre, and assume that's what they get to claim on their taxes. For most of the people searching, that assumption is wrong. The per-kilometre rate is an employer-reimbursement figure — it governs what an employer can pay an employee tax-free for work driving, and it has nothing to do with how self-employed Canadians deduct vehicle expenses. This guide explains what the rate actually is, who it applies to, what happens when an employer pays less than the rate, the one situation where a freelancer can legitimately use it, and what everyone else should be doing instead.
What the CRA Mileage Rate Actually Is
The number people call "the CRA mileage rate" is formally the CRA's reasonable per-kilometre allowance. It is published each year and structured in two tiers:
| Kilometres (per employee, per year) | Approximate Rate |
|---|---|
| First 5,000 km | ~70¢ per km |
| Each km after 5,000 | ~64¢ per km |
| Northwest Territories, Yukon, Nunavut | Add ~4¢ per km to each tier |
The rate is designed to approximate the all-in cost of running a vehicle — fuel, insurance, maintenance, depreciation — compressed into a single per-kilometre figure. It moves with costs: the CRA adjusts it annually, which is why any specific number you read (including the ones above) should be checked against the current-year figure on canada.ca before you build a policy around it.
Here is the part that matters: the rate is a ceiling for tax-free employer reimbursements. It is not a deduction that individuals claim on a tax return.
Who the Rate Is For: Employers Reimbursing Employees
The per-kilometre allowance exists for one relationship: an employer paying an employee who uses their personal vehicle for work driving — site visits, client meetings, deliveries, travel between work locations. When the reimbursement is based solely on kilometres actually driven for work and stays within the CRA's published rate:
- The employee receives the money tax-free. It doesn't appear as income, and nothing needs to be claimed or reported on their return.
- The employer deducts the reimbursement as a business expense.
It is an administrative convenience: no receipts to collect, no business-use percentage to calculate — just a kilometre log multiplied by a rate. Two common arrangements break the tax-free treatment, though. A flat monthly car allowance that isn't tied to actual kilometres is taxable income to the employee. And a per-kilometre amount above the reasonable rate makes the excess taxable. In both cases, the kilometre log is still what substantiates the numbers.
Who It's Not For: The Self-Employed
If you're a sole proprietor — a freelancer, consultant, contractor, or tradesperson filing a T2125 — the per-kilometre rate does not apply to you. Not as an approximation, not as a shortcut. Self-employed Canadians deduct vehicle costs using the actual-expense method: track every vehicle expense for the year, then multiply the total by the business-use percentage from your mileage log. We cover the full method in our motor vehicle expenses on T2125 guide and the log requirements in our CRA mileage log guide.
| Employee (per-km allowance) | Self-Employed (T2125) | |
|---|---|---|
| What the km log does | Total work km × rate = reimbursement | Business km ÷ total km = business-use % |
| What gets claimed | Nothing — reimbursement is simply non-taxable | (Fuel + insurance + maintenance + lease/loan interest + CCA + parking) × business-use % |
| Receipts needed | No (employer's rate covers costs) | Yes — every vehicle expense |
| Where it's reported | Nowhere, if within the rate | T2125, Part 4, line 9281 |
Filing a T2125 with a vehicle deduction calculated as "kilometres × the CRA rate" is the single most common vehicle-expense mistake self-employed Canadians make. The CRA can reject the deduction or reassess it under the actual-expense method — and without expense receipts on file, the reassessed number is usually worse.
If Your Employer Pays Less Than the Rate (or Nothing)
Employers are not required to pay the CRA rate — or anything at all. If you're an employee who drives your own car for genuine work purposes (beyond commuting) and you're under-reimbursed, there is a narrow path to claiming vehicle expenses yourself: Form T777 (Statement of Employment Expenses), which uses an actual-expenses-times-percentage calculation much like the self-employed method. The gatekeeper is Form T2200 — a declaration your employer must sign confirming you were required to use your vehicle for work. No signed T2200, no claim, regardless of how much you drove.
The Incorporated Exception
There is one situation where a "freelancer" can legitimately use the per-kilometre rate: incorporation. If you operate through a corporation, you are an employee of that corporation — and the corporation can reimburse you, its owner-employee, at the CRA's per-kilometre rate for business driving in your personal vehicle. The reimbursement is tax-free to you and deductible to the corporation, and it's often simpler than running the vehicle through the company. Whether it's the better arrangement depends on your numbers — this is squarely a talk-to-your-accountant decision.
Either Way, Everything Starts With a Kilometre Log
Notice what every scenario above has in common. Employee being reimbursed? The employer needs a km log to justify the tax-free treatment. T777 claim? Log. Sole proprietor on T2125? The log produces the business-use percentage that drives the entire deduction. Incorporated owner-employee? The corporation's reimbursement is only defensible with a log behind it.
That's the part InvoiceFast automates. On iOS and Android, it detects your drives and records the date, start and end time, locations, and distance for each trip — start and end points only, not your continuous route. You classify each trip as business or personal (or set time-of-day rules that classify them for you), and the totals are ready for whichever method applies to you. Your first 25 trips are free; Pro + Tax unlocks unlimited trips and PDF/CSV exports of the full log.
Frequently Asked Questions
What is the CRA mileage rate for 2026?
Approximately 70¢/km for the first 5,000 km and 64¢/km after that, plus about 4¢/km in the territories. The rate changes annually — verify the current figure on canada.ca.
Can I just claim 70 cents per kilometre on my taxes?
No — it isn't a personal deduction. It's the ceiling for tax-free employer reimbursements. Self-employed filers use actual expenses × business-use % on T2125; employees claim only via T777 with a signed T2200.
Do employers have to pay the CRA rate?
No. It's a ceiling for non-taxable treatment, not a mandated minimum. Employers can pay less or nothing; the T777/T2200 route is the employee's only recourse.
Is a car allowance taxable?
A flat monthly allowance not tied to kilometres is taxable income. A per-km reimbursement within the CRA rate is not. Amounts above the rate are taxable on the excess.
What records do I need either way?
A kilometre log with the date, destinations, purpose, and distance of each work trip — and for the self-employed, receipts for every vehicle expense on top of it. See our free mileage log template.