What can your corporation pay you per kilometre, and what can it write off on a vehicle?

Four ways a corporation can pay for a vehicle

If you own a Canadian corporation and you need a vehicle for the work, there are four routes open to you. The corporation buys it, the corporation leases it, you own it yourself and bill the corporation for each kilometre you drive for work, or you own it yourself and absorb the cost. The calculator above prices the third route, and it prices the dollar limits that land on the first two.

For a typical owner-manager, meaning someone who both owns the corporation and works in it, the third route is the one the guide behind this calculator works through first: keep the vehicle in your own name and have the corporation pay you the set rate per kilometre. Those payments are deductible to the corporation, tax-free in your hands and absent from your T4, the slip reporting your pay. The cost of that route is that you buy and run the car with money you’ve already paid personal tax on. Two variables decide whether it pays: it suits a modest car you drive a lot, and it suits an expensive car you barely use rather badly.

Two things flip that answer towards corporate ownership, and the first is a work truck or van meeting the usage tests below, in which case every dollar limit on this page falls away. The second is a vehicle that costs no more than the capital cost ceiling and that you’ll drive almost entirely for work, in which case nothing gets disallowed and the personal income you report stays small. The condition that flips it back again is real personal driving in an expensive car, where the corporation’s deductions stop at the ceiling while your personal benefit is calculated on the full price.

How the allowance is priced

A per-kilometre allowance is a set payment you don’t have to account for afterwards, and to reach you tax-free it has to be your business kilometres multiplied by a rate per kilometre, and nothing else.

The rate has two tiers: the first covers the first 5,000 business kilometres, and every kilometre after that takes the lower rate. Income Tax Regulations section 7306 fixes the tier by reference to the individual and the calendar year, so it follows the person rather than the vehicle, and it runs January to December even where the corporation’s financial year doesn’t.

Two separate rules land on the same number, so one figure does both jobs on this page. Federal regulations cap what the corporation can deduct per kilometre, and the CRA treats an allowance paid at that rate as reasonable in the ordinary case, which is what makes it tax-free to you. No tolerance above or below the rate is published, so an allowance paid at any other rate rests on the payer’s own evidence that it was reasonable, which the CRA can test afterwards. The condition that flips it is a reason on file for a different rate (e.g. a written log showing the car costs more per kilometre than the set rate covers).

Three conditions have to hold, and breaking any one of them taxes the whole year’s allowance: the payment is based only on the business kilometres you actually drove, the rate per kilometre is reasonable, and the corporation doesn’t also reimburse you for costs on the same driving (e.g. by handing you a fuel card). Tolls, ferry charges and extra insurance you buy because you use the car for work are the permitted exceptions.

Why the ceilings exist, and what a passenger vehicle is

A corporation can’t deduct what a vehicle cost in the year it bought it. Rather, the corporation adds the cost to a numbered pool called a class and takes a percentage of the leftover balance off its taxable income each year, which is capital cost allowance, the tax system’s version of depreciation.

Every dollar limit on this page applies only to a passenger vehicle, which the CRA defines as a motor vehicle designed or adapted primarily to carry people on highways and streets, seating a driver and no more than eight passengers (e.g. a car, a minivan, an SUV or most pickups). A vehicle outside that definition has no dollar cap at all, though what the corporation paid still has to be reasonable.

For a passenger vehicle the capital cost ceiling is a dividing line drawn before sales tax, and it’s fixed by the year the corporation acquires the vehicle. Below the line the vehicle goes into Class 10 at what the corporation paid, and above the line it goes into Class 10.1, where the Income Tax Act treats the cost as the ceiling however much the corporation actually paid. The difference between the two is a deduction nobody ever gets, in that year or in any later one. Leasing has a monthly ceiling rather than a lifetime one, locked to the date the lease was signed and unmoved for the life of the contract. Loan interest has its own monthly ceiling, and that one applies to a passenger vehicle at any price.

Each ceiling carries the sales tax on itself, which is why the calculator asks for your province. A corporation registered for GST/HST gets the GST or HST back as an input tax credit, but only up to the tax on the ceiling, and provincial sales tax never comes back at all. As such a registered corporation depreciates the ceiling plus any provincial sales tax on it, while one that can’t claim the GST/HST back depreciates the ceiling plus all of the tax.

A zero-emission vehicle takes the higher Class 54 ceiling, and the Income Tax Act decides what counts as one. The vehicle has to be battery electric or hydrogen, or a plug-in hybrid with a battery of at least 7 kWh. No federal purchase incentive can ever have been paid on it (e.g. the Electric Vehicle Affordability Program’s dealer incentive, open since February 2026), and the corporation can’t have elected to leave it out of the class. A vehicle that fails any one of those is an ordinary passenger vehicle, whatever powers it.

One caveat applies to every figure on this page for the current year, and it’s worth knowing before you rely on them. The ceilings and the per-kilometre rates rest on the Department of Finance announcement of January 14, 2026, which everyone administers from that date while the enacting regulation catches up afterwards. Checked on September 23, 2026, the CRA’s own capital cost allowance class list still ran only to the prior year’s ceiling, and its worked lease chart still carried the prior year’s amounts. The consolidated regulation still read the prior year’s ceiling on that date too.

The parts this calculator leaves out

A corporate car costs you something personally, and this page never calculates that cost. A standby charge, meaning income added to your own return because a corporate car is there for you to use, runs for every 30-day period the vehicle is available to you, and an operating expense benefit goes on top wherever the corporation also pays the running costs. Neither is worked out here, because both need facts about your own driving that the calculator never asks for.

What the corporation depreciates includes the sales tax on the ceiling that it doesn’t get back, which the calculator works out from your province and your answer about input tax credits. A year of capital cost allowance needs the half-year rule and the accelerated first-year deduction on top of that, so what you get here is the amount that goes into the class and the amount over the ceiling. That’s the part of the decision the ceiling settles.

Three smaller omissions are worth naming, and the first is imputed interest on a large refundable lease deposit, which the lease rule takes off the deduction and this page doesn’t. The second is the taxable benefit on a work truck, which this page never puts a number on even though it tells you the truck escapes the dollar limits. The third is Quebec, which runs its own parallel limits alongside the federal ones, and this calculator carries none of them.

The vehicles none of this applies to

A work truck or van escapes every dollar limit on this page, and two tests decide whether a given vehicle is one. The CRA measures both of them on how the vehicle was driven in the year the corporation bought or leased it.

• A van or pickup seating no more than the driver and two passengers, driven more than 50% of its kilometres to carry goods or equipment in the course of earning income.
• A van, pickup or SUV seating four to nine, driven 90% or more of its kilometres to carry goods, equipment or passengers in the course of earning income.

Both tests are cliffs rather than sliding scales, so a truck at 85% is subject to every dollar limit on this page. Clearing 90% has a cost of its own, because a truck over that line can’t double as the family car. The full treatment is in our buy-versus-lease guide.

Four worked examples

Each example runs on the same arithmetic as the calculator, so the sentences and the figures can’t disagree.

8,000 business kilometres in Ontario in 2026: the first 5,000 kilometres at 73 cents come to $3,650.00, the other 3,000 at 67 cents come to $2,010.00, and the corporation can pay you $5,660.00 tax-free. That is 70.8 cents a kilometre across the year.

A car the corporation buys from a dealer in Ontario for $52,000 before sales tax in 2026: the ceiling for Class 10.1 passenger vehicles is $39,000, so a corporation that claims the HST back depreciates $39,000, and one that can’t depreciates $44,070. The $13,000 over the ceiling, with the $1,690 of HST on it, is a cost it never deducts, in that year or any later one.

A lease signed in 2026 at $1,400 a month before sales tax, with no list price entered: the monthly ceiling is $1,100, so the corporation deducts at most $13,200 over twelve months, and at least $300 a month, or $3,600 a year, isn’t deductible. In Ontario a manufacturer’s list price over $51,847 would take the deduction lower still.

A lease signed in Ontario in 2026 at $1,000 a month, on a car with a manufacturer’s list price of $60,000: the payment is inside the $1,100 cap, but the list price is over $51,847, so the corporation deducts $864.12 a month, or $10,369.44 over twelve months, and $135.88 a month isn’t deductible.