If you run your business as a sole proprietor, your truck is probably doing double duty: job sites and supply runs during the week, hockey practice and groceries the rest of the time. You can deduct the business part of what that truck costs you. The catch is how you work out that part, and it's not the way most people assume.

The Per-Kilometre Rate Isn't for You

You've probably seen the CRA's "mileage rate" quoted online. For 2026, it's 73 cents per kilometre for the first 5,000 kilometres and 67 cents for each kilometre after that. It's easy to assume you can multiply your business kilometres by that rate and deduct the total.

You can't. That rate is the limit on what an employer can pay an employee as a tax-free allowance. If you're self-employed, the CRA doesn't let you deduct a per-kilometre amount. As a sole proprietor, you're not your own employee. You and the business are the same person, so there's nobody to pay you an allowance.

What you use instead is the actual expense method: add up what the vehicle really cost you for the year, then claim the business share of it.

Step 1: Add Up What the Vehicle Cost You

These are the costs you can include:

  • Fuel
  • Maintenance and repairs
  • Insurance
  • Licence and registration
  • Interest on a vehicle loan, or lease payments

Parking and tolls for business trips work a bit differently. They're 100% business, so you claim them in full rather than splitting them like the costs above.

Step 2: Work Out Your Business-Use Percentage

This is the step everything hinges on. Divide the kilometres you drove for business by the total kilometres you drove all year.

Example: You drove 40,000 km this year, and 16,000 of them were for business. That's 40% business use. If your vehicle costs added up to $9,000, you can deduct 40% of that, or $3,600.

What Counts as Business Driving

  • Counts: driving to job sites, picking up materials, going to the supplier, meeting a client to quote a job, driving to the bank to deposit business cheques.
  • Doesn't count: personal errands, and in most cases your regular commute. If you have a shop or yard you report to every day, driving from home to the shop is personal. But if your home is your business's base of operations, the trips from home out to job sites are generally business.

Keep a Logbook

Your business-use percentage is only as good as your records. If the CRA reviews your return, a logbook is how you prove the number. For each business trip, record the date, where you went, why, and how many kilometres you drove. Also note your odometer reading at the start and end of the year so you have your total.

There's a shortcut once you've done it properly. If you keep a full logbook for one complete year, in later years you can keep a log for a representative three-month period instead, as long as your business use in that period is within 10% of the full-year result. A mileage-tracking app on your phone makes either version a lot less painful.

If You're Registered for GST

If you're GST registered, you can also claim back the GST you paid on your vehicle costs through Input Tax Credits, using the same business-use percentage. The same logbook supports both claims.

The Bottom Line

As a sole proprietor, there's no shortcut rate. You claim your real costs, split by how much you actually drove for business, and your logbook is what makes that split hold up. Start the logbook on day one. Rebuilding a year of driving from memory in April is how good deductions turn into reassessments.

Incorporated instead? The rules are different. See using your personal vehicle for corporate business.

This article is for general informational purposes only and does not constitute legal or tax advice. For guidance specific to your situation, consult a CPA or Canadian tax professional.