On January 14, 2026, the Canada Revenue Agency (CRA) announced the 2026 Automobile Deduction Limits.
Effective in 2026, the limit on the deduction of tax-exempt allowances paid by employers to employees who use their personal vehicle for business purposes in all provinces will increase from 72 to 73 cents per kilometre for the first 5,000 kilometres driven and from 66 to 67 cents for each additional kilometre. For the territories, the limit will increase from 76 to 77 cents per kilometre for the first 5,000 kilometres driven and from 70 to 71 cents for each additional kilometre.
The general prescribed rate used to determine the taxable benefit of employees relating to the personal portion of automobile expenses paid by their employers will remain unchanged at 34 cents per kilometre. For people employed principally in selling or leasing automobiles, the rate used to determine the employee’s taxable benefit will also remain unchanged at 31 cents per kilometre.
Employers providing a per-kilometre, non-taxable automobile allowance should:
- Review and update their reimbursement policies to ensure they align with the CRA’s prescribed rates; and
- Ensure that the rates adhere to the CRA's guidelines for reasonableness.