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Tax-Free Allowance
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First 5,000 km
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Additional km
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Rate Tier Used
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Average $ / km
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Allowance Received
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Difference
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For information only — not tax advice. Rates are the prescribed reasonable per-kilometre automobile allowance limits effective January 1, 2026: provinces 73¢/67¢; territories (YT/NT/NU) 77¢/71¢. An allowance is tax-free only if based solely on business kilometres and at or below these rates; amounts above may be taxable. Self-employed/business vehicle deductions may require actual expense records and eligibility review. Confirm current rates at canada.ca before filing. Source: Finance Canada, 2026-01-14.
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2026 CRA automobile allowance rates
The Canada Revenue Agency sets a prescribed "reasonable" per-kilometre rate each year. An allowance paid at or below this rate, based only on business kilometres driven, is generally tax-free to the employee and deductible to the employer. The rates below took effect January 1, 2026.
| Location | First 5,000 km | Each additional km |
|---|---|---|
| Provinces | 73¢ / km | 67¢ / km |
| Territories (Yukon, NWT, Nunavut) | 77¢ / km | 71¢ / km |
The territories receive an extra 4¢ per kilometre in both tiers. The 5,000 km first-tier threshold resets at the start of each calendar year.
Frequently Asked Questions
What is the CRA per-kilometre automobile allowance rate for 2026?
For 2026, the prescribed reasonable per-kilometre automobile allowance is 73 cents per kilometre for the first 5,000 kilometres driven for business in the provinces, and 67 cents for each additional kilometre. In the territories — Yukon, Northwest Territories, and Nunavut — the rate is 77 cents for the first 5,000 kilometres and 71 cents for each additional kilometre. Source: Department of Finance Canada, January 14, 2026.
How does the 5,000 km tier work?
The higher first-tier rate applies to the first 5,000 business kilometres you drive in a calendar year. Every kilometre beyond 5,000 is calculated at the lower second-tier rate. The 5,000 km threshold resets at the start of each calendar year.
Which provinces and territories get the higher rate?
Only the three territories — Yukon, the Northwest Territories, and Nunavut — receive the higher rate, which is 4 cents per kilometre above the provincial rate in both tiers. All provinces use the standard provincial rate.
Is the allowance tax-free?
An allowance is generally tax-free to the employee when it is based solely on the number of business kilometres driven and is at or below the prescribed rates. Allowances that exceed these rates, or that are not based only on kilometres driven, may be taxable. This tool is for information only and is not tax advice — confirm current rates and your eligibility at canada.ca before filing.
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