CRA Form T2125 Motor Vehicle Mileage Log Guide 2026

1. What Form T2125 and a Vehicle Mileage Log Are Used For

Form T2125, Statement of Business or Professional Activities, is used by eligible self-employed individuals to report business or professional income and expenses. A self-employed person who uses a vehicle for business can generally deduct only the portion of allowable motor vehicle expenses that relates to earning business income. The core calculation is based on the vehicle's business kilometres compared with total kilometres, supported by adequate records. Employees are subject to a separate employment-expense regime and generally use Form T777, not Form T2125.

2. Self-Employed vs Employee Vehicle Rules

The original distinction between self-employed and employee taxpayers was too broad. A self-employed person with business income generally uses Form T2125 or another applicable business form. An employee who incurs qualifying motor vehicle expenses because of employment generally uses Form T777 and must satisfy the specific employment-expense conditions. Most employees cannot deduct ordinary commuting or personal vehicle costs simply because they drive to work.

3. How to Calculate a Self-Employed Vehicle Deduction

For a vehicle used for both business and personal purposes, CRA generally allows only the portion of allowable vehicle operating expenses related to earning business income. Start with actual eligible expenses, determine the business-use percentage from reliable kilometre records, and apply that percentage. Parking expenses directly related to business activities can generally be deducted in full rather than being reduced by the vehicle-use percentage. CCA is calculated separately.

4. What a Full CRA Vehicle Logbook Should Contain

CRA describes an accurate full-year logbook as the best evidence supporting business use of a vehicle. For each business trip, the log should record the date, destination, purpose and number of kilometres driven. Odometer readings should also be recorded at the start and end of the fiscal period. If the vehicle changes during the fiscal period, record the relevant change dates and odometer readings.

5. Simplified Logbook Method

CRA permits a simplified logbook method after a complete 12-month base-year logbook has been established. In a subsequent year, a three-month sample logbook can be used to extrapolate annual business use when the vehicle's usage remains within the required range. The simplified method is not simply permission to log any convenient three months without comparison to the base year.

6. 2026 Vehicle Expense Limits and Restricted Amounts

Certain vehicle costs are subject to prescribed limits. These limits are separate from the business-kilometre allocation and must not be described as a simple monthly or per-kilometre deduction. For 2026, Finance Canada announced a $39,000 before-tax Class 10.1 ceiling for new and used passenger vehicles acquired on or after January 1, 2026. The deductible leasing-cost limit remains $1,100 per month before tax for new leases entered into on or after January 1, 2026. The actual allowable lease deduction requires the CRA leasing-cost calculation and can be affected by the manufacturer's list price, lease duration and prior deductions.

7. 2026 CRA Per-Kilometre Rates: What They Actually Mean

CRA's 2026 reasonable automobile allowance rates are $0.73 per kilometre for the first 5,000 kilometres and $0.67 for additional kilometres in the provinces. In the Northwest Territories, Yukon and Nunavut, the rates are $0.77 and $0.71. These rates are relevant primarily to employee automobile allowances under the Income Tax Regulations. An employer can generally treat an allowance based solely on business kilometres as reasonable when the prescribed conditions are met. They should not be presented as the standard self-employed T2125 mileage deduction method.

8. Commuting, Business Travel and Home-Based Businesses

Travel classification depends on the taxpayer's circumstances and the place from which the business or employment travel begins. Ordinary personal commuting between a home and a regular place of employment is generally personal. For a self-employed person whose home is a genuine base of business, travel from the business base to a business destination can be business travel, subject to the normal requirements for earning business income. A visit to a client, supplier or other business destination can generally be business travel when the trip has a sufficient connection to the income-earning activity.

9. Parking, Tolls, Interest and Other Vehicle Costs

Vehicle costs do not all receive identical treatment. CRA identifies licence and registration fees, fuel and oil, electricity for zero-emission vehicles, insurance, loan interest, maintenance and repairs, and leasing costs as potential motor vehicle expenses. Mixed-use operating expenses generally require allocation by business use. Business-related parking can generally be claimed in full. CCA is separate from operating expenses.

10. Records, Electronic Logs and CRA Reviews

CRA expects taxpayers to maintain records that support the expenses claimed and the business portion of vehicle use. Electronic records are acceptable when they are accessible and readable and otherwise meet CRA's record requirements. A taxpayer is not required to use a particular commercial mileage application. A GPS or mileage application can be practical evidence when it captures the relevant information and the records can be preserved and produced, but the application itself does not guarantee that CRA will accept a deduction.

11. Step-by-Step 2026 T2125 Vehicle Workflow

A defensible vehicle claim starts with classification and record keeping rather than with a mileage-rate shortcut.

12. 2026 Accuracy Notes

This page distinguishes between CRA's reasonable employee automobile allowance rates and the actual self-employed motor vehicle expense rules. The 2026 reasonable-rate figures are not a universal T2125 per-kilometre write-off. The 2026 automobile limits announced by Finance Canada include the $39,000 Class 10.1 capital-cost ceiling for vehicles acquired on or after January 1, 2026 and the continued $1,100 monthly passenger-vehicle leasing-cost amount for new leases. Exact deductibility can depend on vehicle type, acquisition date, business-use percentage, lease terms, financing, employment conditions, business structure and other facts.

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