CRA Mileage Rate in Canada: How Much You Can Claim Per Km in 2025

For many incorporated businesses and SMEs in Canada, mileage reimbursement is part of day-to-day operations. Whether you reimburse employees or use your own vehicle as a shareholder-employee, the CRA mileage rate directly affects your deductions, payroll compliance, and internal administration.

Each year, the Canada Revenue Agency updates its prescribed per-kilometre rate to reflect rising vehicle operating costs. Understanding how these rates work helps you reimburse employees fairly, avoid taxable benefits, and apply the correct rules when using a personal vehicle for business. It also encourages you to put a clear internal mileage reimbursement policy in place.

This guide provides the CRA mileage rates for 2025, 2024, 2023, and 2022, along with practical explanations, scenarios, and rules specifically tailored to Canadian SMEs and incorporated business owners.

What Is the CRA Mileage Rate? Official Definition for Business Owners

The CRA mileage rate — also called the prescribed per-kilometre allowance — is the maximum amount an employer can reimburse an employee for using a personal vehicle without creating a taxable benefit.

A reasonable allowance:

• is not included in the employee's taxable income,
• is deductible for the employer,
• is generally exempt from CPP, EI, RRQ, and RQAP contributions.

To be considered reasonable, the allowance must be based exclusively on business kilometres, use a reasonable per-kilometre rate (usually the CRA prescribed rate), and avoid duplicating other reimbursements except for limited exceptions (insurance for business use, tolls, ferries).

This rate applies only to employer-paid allowances. It does not apply to self-employed individuals or shareholders who are deducting motor vehicle expenses for business income as part of business income — they must use the actual expense method. A shareholder-employee may use the CRA mileage rate only when reimbursed through an employment relationship supported by proper mileage logs.

CRA Mileage Rates for 2025, 2024, 2023 and 2022 (Updated Table)

The CRA mileage rates have increased in recent years due to inflation and higher vehicle operating costs.

For the years 2022 to 2025, the territorial rate is 4 cents higher than the provincial rate. This reflects the higher cost of owning and operating a vehicle in remote regions.

Why These Rates Matter for Small and Medium-Sized Businesses

For small and medium-sized businesses, using the CRA mileage rate simplifies reimbursement because it replaces subjective or unclear expense claims with a standardized, defensible rate.

A prescribed rate helps you:

• Keep reimbursements tax-free, as long as they follow CRA rules;
• Forecast costs accurately, because reimbursements depend only on business kilometres;
• Reduce audit exposure, since payments are easier to justify when they match the prescribed rate;
• Maintain transparency with employees, avoiding disputes about what is fair or acceptable;
• Simplify administration, using a method that is easy to apply and explain internally.

Using a recognized rate gives your business a predictable, compliant framework for mileage reimbursement.

Who Can Use CRA Mileage Rates and When Do They Apply?

The rules differ depending on whether you are an employee, self-employed worker, or incorporated business owner.

As an Employee Using a Personal Vehicle

If an employee uses their vehicle for work, the employer may reimburse their travel expenses at the prescribed rate. The allowance remains tax-free if it is based solely on actual business mileage, uses a compliant rate, and is supported by a detailed log.

If the allowance exceeds the CRA rate, the excess becomes a taxable benefit. If not fully reimbursed, the employee must:

• obtain a signed T2200 form,
• claim their actual expenses on the T777 form.

As a Self-Employed Individual or Sole Proprietor

Self-employed workers cannot use the CRA mileage rate. They must use the actual expense method, which involves tracking:

• total and business kilometres,
• the business-use percentage,
• all real vehicle expenses (fuel, insurance, repairs, parking, leasing/loan interest, and CCA depreciation).

To be clear, self-employed individuals must ignore the CRA mileage rate and always calculate their deduction based on actual vehicle expenses. To apply the correct depreciation rules, consult the depreciation categories and CCA rates used in Canada.

As an Employer or an Incorporated Owner

If you run an incorporated business, the CRA mileage rate can apply only if you are a shareholder-employee (i.e., you receive employment income), you use your personal vehicle for employment-related duties, and you keep a proper logbook.

When these conditions are met, the reimbursement is typically non-taxable and exempt from CPP, EI, RRQ, and RQAP.

If you are not an employee, then vehicle reimbursements may be considered:

• shareholder benefits,
• disguised dividends,
• or governed by other rules if the corporation pays the expenses directly.

None of these fall under the CRA mileage allowance framework.

If your corporation provides a company-owned vehicle, you must apply the rules for taxable automobile benefits. See our guide on taxable benefits for company vehicles in Canada.

What Counts as Business Mileage (and What Doesn't)

To apply the CRA rules correctly, you must distinguish business travel from personal travel.

Eligible Business Mileage (for business purposes)

• Visiting clients, suppliers, or customers
• Attending off-site business meetings or industry events
• Travelling between two business locations (even if both belong to your company)
• Delivering goods, equipment, or documents
• Going to the bank for business deposits
• Picking up supplies needed for business operations

Non-Eligible Mileage

• Daily commuting between home and your regular workplace
• Personal detours during a business trip
• Weekend travel or personal errands
• Mixed-purpose trips when personal and business kilometres cannot be separated
• Driving from home to pick up your mail or office supplies if your home is not your principal place of business

These business-related trips must be distinguished from personal expenses. In practice, allowable mileage follows the same logic as business expenses deducted by the CRA, allowing you to maintain a consistent and compliant approach to the tax management of your travel expenses.

Real-Life Scenarios for SMEs

Scenario: You drive from home directly to a client's office.
→ This counts as business mileage.

Scenario: You stop at the grocery store during a business trip.
→ The detour does not count.

Scenario: You drive from your office to a second business location.
→ This is eligible.

How to Calculate Mileage Reimbursement in Canada

Mileage reimbursement is calculated by multiplying eligible business kilometres by the applicable CRA rate.

Example Calculation for 2025

An employee drives 7,000 km for business in Ontario.

• First 5,000 km × $0.72 = $3,600
• Remaining 2,000 km × $0.66 = $1,320
• Total reimbursement: $4,920

If the allowance is reasonable and supported by a logbook, the full amount is tax-free for the employee and deductible for the business.

Example for Self-Employed (Actual Expense Method)

If you drive 18,000 business km out of 30,000 total km, and your annual vehicle expenses total $9,000:

• Business-use percentage = 60%
• Deductible amount = $5,400

Self-employed individuals must always use this actual-expense method. The CRA mileage rate does not apply to business-income reporting.

When Does Mileage Reimbursement Become Taxable?

A mileage reimbursement is tax-free only when it qualifies as a reasonable allowance under CRA rules. If it does not meet these conditions, the entire amount becomes a taxable benefit and must be included on the employee's T4.

An allowance is reasonable when:

• calculated solely on business kilometres,
• based on the CRA rate (or a lower rate),
• supported by adequate records,
• not duplicating other reimbursements.

It becomes taxable when:

• paid as a flat monthly or annual amount,
• combined with a flat rate and a per-km rate,
• the rate is unreasonably high,
• the employee does not keep a logbook.

Taxable allowances must be added to the employee's T4 and may require payroll deductions.

Quebec Mileage Rates and Revenu Québec Compliance

Revenu Québec publishes its own table of reasonable automobile allowances. The rates align with CRA rates, but the criteria for determining taxability differ.

An allowance is non-taxable in Quebec only if it:

• is based exclusively on business kilometres,
• is properly documented,
• is not combined with any other reimbursement.

If taxable, it must appear on the employee's RL-1 slip and may increase RRQ and RQAP contributions.

For businesses operating in multiple provinces, it is important to apply the correct provincial interpretation based on where the employee reports for work. Even when the underlying rates are the same, the method of determining whether an allowance is taxable can differ between the CRA and Revenu Québec.

Mileage Logs and Documentation Required by CRA and Revenu Québec

To keep an allowance non-taxable — or to deduct motor vehicle expenses — the CRA expects detailed mileage records kept in real time, not reconstructed months later.

A compliant logbook includes:

• the date of each trip,
• the starting point and destination,
• the purpose of the trip,
• the number of kilometres driven,
• the starting and ending odometer readings.

You can keep a log for each trip or a complete annual log. After a full year of tracking, you may be allowed to use a simplified log if your driving habits remain the same. Accurate logs protect your business during CRA or Revenu Québec audits.

Common Mistakes Businesses Should Avoid

Many businesses make the same errors when reimbursing mileage. Here are the most common ones:

• Using CRA mileage rates for self-employed deductions
• Reimbursing commuting distance
• Paying flat allowances without mileage tracking
• Failing to collect logbooks
• Mixing personal and business kilometres
• Not updating policies when rates change

In the event of an error in the reimbursement of vehicle expenses, the company may also be subject to penalties, such as those imposed for late filing of corporate tax returns.

Conclusion: Staying Compliant and Saving Money Through Proper Mileage Management

Mileage reimbursement is a routine part of business operations in Canada. Using the CRA mileage rate — especially the updated CRA mileage rate 2025 — correctly helps you stay compliant, reimburse employees fairly, and avoid taxable benefits. Incorporating clear documentation and a simple internal policy makes mileage easier to manage and defend during audits.

Distinguishing between employees, shareholder-employees, and self-employed individuals ensures that you apply the right method in every situation. Clear documentation and consistent tracking help protect your business and keep tax filings accurate.

If you want to file your business tax returns in full compliance, our corporate tax experts can prepare your corporate tax returns and ensure that the applicable mileage rate is correctly included in your file.

This article is for general information purposes only and does not constitute tax, accounting, or legal advice. Mileage rules vary depending on your circumstances. Always consult a CPA or qualified tax professional before making decisions based on this information.