How Self-Employed Canadians Can Claim Vehicle Expenses for 2026

If you use a vehicle for business purposes as a self-employed Canadian, you can claim a portion of your vehicle expenses as a tax deduction. The key rule is that you can only claim the percentage of expenses that directly relates to business use. For example, if you drive your car 60% for business and 40% for personal use, you can deduct 60% of eligible vehicle costs. The CRA accepts two methods for calculating these deductions: the actual expense method (tracking real costs) or the simplified kilometre rate method (a fixed rate per km driven for business). Vehicle expenses fall into several eligible categories that self-employed people commonly overlook. Operating costs you can claim include: - Fuel and oil changes - Vehicle maintenance and repairs (tires, brakes, batteries, tune-ups) - Vehicle insurance premiums - Registration and license fees - Parking fees related to business activities - Tolls and road taxes - Car wash and detailing (if reasonable) Capital costs (depreciation) you can claim: If you own the vehicle outright or financed it, you can claim capital cost allowance (CCA) on your tax return. This is different from tracking monthly operating expenses.

Frequently Asked Questions

Can I claim personal vehicle expenses if I use my car for business sometimes?

Yes, but only for the business-use portion. You must track what percentage of your total driving is for business purposes, then claim that same percentage of all vehicle expenses (fuel, maintenance, insurance, etc.). Commuting to a regular workplace is never deductible.

Which method is better: tracking actual expenses or using the kilometre rate?

The kilometre rate method is simpler if you have modest vehicle costs and straightforward mileage. The actual expense method may save you more money if your vehicle has high operating costs. Choose based on which requires less administrative effort for your situation.

What if I use a leased vehicle for business? Can I still claim expenses?

Yes. You can claim the business-use percentage of your lease payments, fuel, insurance, and maintenance costs. You cannot claim CCA on a leased vehicle, but lease payments themselves are fully deductible business expenses.

How do I prove my business-use percentage to the CRA if audited?

Keep a mileage log or trip diary for at least 12 weeks showing the date, destination, and business purpose of each trip. The CRA may extrapolate this sample period to your entire year. Without this documentation, they may disallow the entire vehicle expense claim.

Can I claim vehicle loan interest as a business deduction?

Yes, the interest portion of your vehicle loan is deductible. However, the principal repayment is not. You can usually find the interest amount on your loan statement or request an interest breakdown from your lender.

Steps

Choose your tracking method: Decide whether you'll use the actual expense method (tracking all receipts) or the kilometre rate method (tracking only business kilometres). The kilometre method is simpler but may yield a smaller deduction; the actual expense method requires more record-keeping but often produces a larger claim.
Start a mileage or expense log: Create a simple spreadsheet or use a mobile app to record every business trip. Include the date, destination, business purpose, and kilometres driven (or fuel cost if using actual expenses). Keep receipts for fuel, maintenance, insurance, and registration.
Track all vehicle-related receipts: Collect and organize receipts for fuel, maintenance, repairs, vehicle insurance, registration fees, parking, and tolls throughout the year. File them by month or category so they're easy to find during tax time.
Calculate your business-use percentage: At year-end, divide your total business kilometres by your total kilometres driven (or use your expense log to see what percentage of trips were business-related). This percentage applies to all vehicle expenses you claim.
Gather documents for depreciation (if applicable): If you own the vehicle, collect the original purchase invoice, finance agreement, and any capital improvements you made. You'll need these to calculate Capital Cost Allowance (CCA) on your tax return.
Report expenses on Form T2125: When filing your self-employed tax return, enter your total vehicle expenses on the Statement of Business Activities (Form T2125). If claiming CCA, also complete Schedule 8. Attach a note explaining your business-use percentage and tracking method.
Keep all records for six years: Store your mileage logs, receipts, purchase invoices, and any CRA correspondence in a safe place for at least six years. The CRA has this period to audit your return and request supporting documents.