January 14, 2026 – Ottawa, Ontario – Department of Finance Canada

Today, the Department of Finance Canada announced the automobile income tax deduction limits and expense benefit rates that will apply in 2026.

The following changes to limits and rates took effect as of January 1, 2026:

• The ceiling for capital cost allowances (CCA) for Class 10.1 passenger vehicles will increase from $38,000 to $39,000, before tax, in respect of vehicles (new and used) acquired on or after January 1, 2026.
• The limit on the deduction of tax-exempt allowances paid by employers to employees who use their personal vehicle for business purposes in the provinces will increase by one cent to 73 cents per kilometre for the first 5,000 kilometres driven, and to 67 cents for each additional kilometre. For the territories, the limit will also increase by one cent to 77 cents per kilometre for the first 5,000 kilometres driven, and to 71 cents for each additional kilometre.

The following limits and rates remained the same as of January 1, 2026:

• Deductible leasing costs will remain at $1,100 per month, before tax, for new leases entered into on or after January 1, 2026.
• The general prescribed rate used to determine the taxable benefit of employees relating to the personal portion of automobile expenses paid by their employers will remain at 34 cents per kilometre for 2026. For people who are employed principally in selling or leasing automobiles, the rate used to determine the employee’s taxable benefit will also remain the same at 31 cents per kilometre for 2026.
• The ceiling for CCA for Class 54 zero-emission passenger vehicles ($61,000, before tax, in respect of new and used vehicles) will remain the same for 2026.
• The maximum allowable interest deduction will remain the same at $350 per month for new automobile loans entered into on or after January 1, 2026.