Department of Finance Canada announced the automobile income-tax deduction limits and expense benefit rates that apply for 2026.
The Class 10.1 passenger-vehicle capital cost allowance ceiling increased from $38,000 to $39,000 before tax for new and used vehicles acquired on or after January 1, 2026.
The tax-exempt allowance limit for employees using a personal vehicle for business increased by one cent in the provinces, to 73 cents per kilometre for the first 5,000 kilometres and 67 cents for each additional kilometre.
For the territories, the corresponding allowance limits increased to 77 cents per kilometre for the first 5,000 kilometres and 71 cents for each additional kilometre.
Other limits stayed the same. Deductible leasing costs remain $1,100 per month before tax for new leases entered into on or after January 1, 2026.
The general prescribed rate for calculating the taxable benefit from the personal portion of employer-paid automobile expenses remains 34 cents per kilometre for 2026. For employees principally selling or leasing automobiles, the rate remains 31 cents per kilometre.
The rates matter for employers, employees, and incorporated business owners because they affect deductible vehicle costs, reasonable allowances, payroll reporting, and taxable benefits for the year.