Vehicle Deductions for Canadian Freelancers: Mileage and Expenses Explained

This is general information, not professional tax advice. For official guidance, see the CRA's motor vehicle expenses page or talk to a tax professional.

If you drive for work — client visits, picking up supplies, job sites — some of what you spend on your vehicle is a legitimate business expense. But vehicle deductions trip up more freelancers than almost any other expense category, mostly because of one persistent myth: that you can just multiply your business kilometres by a flat CRA rate. You can't. Here's how it actually works.

The flat per-km rate is not for you

You've probably seen a "CRA mileage rate" mentioned somewhere — for 2026 it's 73 cents per kilometre for the first 5,000 km and 67 cents after that (higher in the territories). That rate exists so employers can pay a tax-free allowance to employees who use their own car for work. It is not a deduction method available to the self-employed. If you're filing a T2125, claiming "kilometres driven × the CRA rate" as your vehicle deduction is the wrong method, and the CRA will reassess it. Self-employed people use the actual-expense method instead, described below.

How the actual-expense method works

The math has two steps:

1. Figure out your business-use percentage. Track your odometer reading on January 1 and December 31 to get total kilometres driven for the year, and keep a log of your business kilometres. Business ÷ total = your percentage. Drive 20,000 km total and 8,000 for business, and you're at 40%.
2. Apply that percentage to your actual vehicle costs — not to a flat rate. Add up what you actually spent on the vehicle for the year (gas, insurance, maintenance, licensing, loan interest, or lease payments), then claim your business-use percentage of that total.

So a freelancer who spent $6,000 running their car for the year and drove it 40% for business claims $2,400 — regardless of how many kilometres that 40% represents. The kilometres set the percentage; they don't set the dollar amount directly.

What counts as business driving (and what doesn't)

This is where people either overclaim or underclaim. The CRA's core distinction is between a regular place of employment and a point of call:

• Driving from home to your regular workplace, and back, is personal driving — an ordinary commute, not deductible. This applies even if you're self-employed, if you have a fixed location (an office, a studio, a rented space) you report to regularly.
• If your home genuinely is your principal place of business — you do most of your actual work there — then trips from home to a client site, a job site, or to pick up supplies aren't a "commute" in the CRA's sense, because you're travelling from your place of business to a point of call. That's business driving.
• Travel between two regular work locations during the day (say, your rented studio and a second regular client site) generally counts as business use.
• Travel to a point of call — anywhere you go to do work that isn't a fixed regular location, like a one-off client meeting or a supply run — is business use, whether it starts from home or your regular workplace, as long as it's reasonable given the circumstances.

In practice: if you work mostly from a home office and drive out to see clients or grab materials, most of that driving is business use. If you rent a separate studio or office and drive there every day, that daily drive is personal, even though the rest of your day is 100% work.

The logbook: full year once, then a shortcut

The CRA expects a logbook — date, destination, purpose, and kilometres for each trip, plus your total personal driving too, since the percentage compares business kilometres to all kilometres. The first year you use a vehicle for business is your base year: track everything, the full 12 months, to establish a real business-use percentage.

After that, the CRA allows a shortcut: keep a full logbook for any continuous 3-month sample period each year. If that sample period's business-use percentage is within 10 percentage points of the same 3-month stretch in your base year, you can use a formula to project the full-year percentage from the sample instead of logging every trip forever. It's still real record-keeping, just less of it — a phone app or a simple spreadsheet works fine, but gas receipts alone are not proof of business use. Only a logbook establishes the percentage.

Buying a vehicle: CCA instead of full expensing

You can't deduct the full purchase price of a vehicle in the year you buy it. Instead you depreciate it over time through capital cost allowance (CCA), at 30% declining balance per year (with only half that rate allowed in the year of purchase — the "half-year rule"), and then apply your business-use percentage to the CCA claim, same as any other vehicle expense.

Which CCA class you're in depends on the price:

• Class 10 covers passenger vehicles under the price ceiling — the full cost is depreciable.
• Class 10.1 covers passenger vehicles above the ceiling ($39,000 before tax for vehicles bought in 2026, up from $38,000 in 2025 — this ceiling is set annually, so check the current figure before you calculate). You still only get to depreciate up to the ceiling amount, not the full purchase price, and each Class 10.1 vehicle sits in its own separate class — no combining multiple vehicles together, and no "recapture" or terminal loss when you eventually sell it, unlike most other CCA classes.
• Zero-emission vehicles (Class 54) get a much higher ceiling — $61,000 before tax for 2026 — reflecting their typically higher purchase price.

If you lease instead of buy, there's a separate monthly cap on how much of the lease payment is deductible ($1,100/month before tax for leases starting in 2026), and a separate monthly cap on interest if you financed the purchase with a loan ($350/month for 2026). Both caps apply before your business-use percentage — you prorate the capped amount, not the sticker price of your lease or loan payment.

Other deductible vehicle costs

Once you have your business-use percentage, it applies across the board to: fuel, insurance, routine maintenance and repairs, licensing and registration, car washes, and any loan interest or lease payments (subject to the caps above). Parking and tolls that are directly tied to a specific business trip are generally claimed at 100%, not prorated by your overall percentage, since they're incurred for that specific trip rather than general vehicle upkeep.

Keeping the proof

Keep your logbook (base year, plus each year's sample period), your fuel and maintenance receipts, insurance and registration statements, and — if you financed or leased — the loan or lease agreement showing the payment schedule. Hang onto all of it for six years from the end of the relevant tax year, same as any other business record. If the CRA ever asks how you arrived at your business-use percentage, the logbook is the answer; a stack of gas receipts on its own isn't.

This is general information, not professional tax advice. Always confirm current rates and ceilings on canada.ca — they change annually — or with a qualified tax professional.