T2125 motor vehicle expenses for the self-employed

If you are self-employed in Canada, you deduct the business share of what your vehicle costs you. The share comes from your logbook. This page covers the calculation, the capital cost allowance classes, and the 2026 limits. The sources are the CRA pages on motor vehicle expenses and calculating motor vehicle expenses on Form T2125, and the Department of Finance release on the 2026 automobile deduction limits.

This page is general information, not tax advice. The United States counterpart is standard mileage rate vs. actual expenses.

There is no per-kilometre rate

The United States lets a self-employed person multiply business miles by a standard rate. Canada does not. The CRA automobile allowance rates are for employer-paid allowances only. A self-employed person deducts actual costs, prorated by kilometres.

The calculation

The business share is business kilometres divided by total kilometres for the year. The CRA example is 27,000 business kilometres out of 30,000 total, which is 90%, applied to $7,000 of vehicle costs for a deduction of $6,300.

The costs you prorate include fuel and oil, insurance, licence and registration fees, maintenance and repairs, interest on a loan to buy the vehicle, leasing costs, and capital cost allowance. Business parking fees and supplementary business insurance are deductible in full, without proration.

Where it goes on the return

Form T2125, Statement of Business or Professional Activities, has Chart A for motor vehicle expenses. The prorated total goes to line 9281. Chart B and Chart C cover capital cost allowance and leasing costs. Guide T4002 walks through each line.

Capital cost allowance

A vehicle is depreciated through capital cost allowance rather than deducted in the year you buy it. Passenger vehicles that cost at or below the ceiling go in Class 10, at 30% a year on the declining balance. A passenger vehicle that costs more than the ceiling goes in Class 10.1, also at 30%, in its own class, and its capital cost is capped at the ceiling. Zero-emission passenger vehicles have their own class, Class 54, with a higher ceiling.

The 2026 limits

The 2026 limits apply to vehicles bought, and leases and loans entered into, on or after January 1, 2026. They were announced on January 14, 2026.

Employees. T2200 and T777

Most employees cannot deduct the cost of driving for work, because the employer either provides a vehicle or pays an allowance. When neither happens and your job requires you to drive, you may be able to claim the business share of your vehicle costs on the same terms as the self-employed. The source is the CRA page on line 22900, other employment expenses. The United States counterpart is mileage reimbursement.

You can claim if all three conditions apply. You were normally required to work away from your employer's place of business, or in different places. Your contract of employment required you to pay your own motor vehicle expenses. You did not receive a non-taxable allowance, which is a reasonable per-kilometre amount as explained on the allowance rates page.

Form T2200, Declaration of Conditions of Employment, is completed and signed by your employer and states that the conditions apply. You keep it with your records and do not file it, but the CRA can ask to see it. Form T777, Statement of Employment Expenses, is where you calculate the claim. You enter total kilometres, employment kilometres, and each category of cost, and the form prorates the costs by kilometres. The result goes on line 22900 of your return. The same capital cost allowance classes, leasing cap, and interest cap apply.

Driving between your home and your employer's place of business is personal. The CRA lists exceptions, including a home office that is your regular workplace, security-restricted sites where transit is impractical, and remote or special work sites. Driving from home directly to a client site is employment driving. Keep the same trip records and odometer readings as the self-employed, and receipts for every cost you claim.

How Miles handles this

• Every drive on a Canada vehicle is classified as business or personal, and the year total comes from the odometer readings, so the business share is always current.
• Expenses are recorded per vehicle in the categories Chart A uses. Business parking is kept separate so it is not prorated.
• The T2125 report gives the business kilometres, total kilometres, the business share, each expense category, the prorated total for line 9281, and the inputs for Chart B and Chart C with the 2026 ceilings and caps applied.
• The accountant package includes the report, a CSV of every trip, and receipt images.
• For an employee, the T777 report gives the total kilometres, the employment kilometres, the share, and each cost category, and a T2200 checklist lists what your employer needs to confirm before the claim is valid. Review note. The T2200 checklist is a product detail beyond the feature decisions.

Miles is coming soon.