Corporate Vehicle Expenses
Company-owned vehicle or per-km allowance: the standby charge, operating cost benefit, 2026 limits and the pickup truck exception.
The short version
- Two common setups: the corporation owns or leases the vehicle, or you own it and the corporation pays you a per-kilometre allowance.
- If the company owns it and you use it personally, you have a taxable benefit: a standby charge (2% of the cost a month, or two-thirds of the lease) plus an operating cost benefit (34 cents per personal km for 2026).
- If you own it, the corporation can pay you a tax-free allowance of 73 cents per business km for the first 5,000 km in 2026 and 67 cents after, and deduct it.
- Passenger vehicles have 2026 deduction caps: CCA on $39,000 ($61,000 zero-emission), leases of $1,100 a month and interest of $350 a month, before tax.
- Pickups and vans used mainly to haul goods or equipment can escape the passenger vehicle limits and the standby charge, but personal use is still a taxable benefit.
Corporate Vehicle Tax Rules in Canada
"Put the truck through the company" is the most popular tax plan in Canada, ahead of moving to Florida. Sometimes it's the right call. Often the standby charge quietly takes back most of what you thought you saved, and the paperwork shows up in the form of a T4 box nobody expected. Here's how both setups really work, with numbers.
Option 1: The Corporation Owns or Leases It
The corporation deducts the costs (CCA or lease, fuel, insurance, repairs, interest) and claims GST/HST input tax credits, within the passenger vehicle limits. In exchange, your personal use is a taxable benefit, added to your T4 if you're an employee-shareholder, or taxed as a shareholder benefit if you're not on payroll.
| Benefit | How it's calculated (2026) |
|---|---|
| Standby charge, owned vehicle | 2% of the original cost, including GST/HST, for each month it's available to you |
| Standby charge, leased vehicle | Two-thirds of the lease cost, excluding insurance, for the months it's available |
| Reduced standby charge | If more than 50% of the driving is business and personal driving is under 1,667 km a month (20,004 a year), the charge is multiplied by personal km divided by 20,004 |
| Operating cost benefit | 34 cents per personal km; or half the standby charge if business use is over 50% and you tell the employer in writing by December 31 |
Driving between home and the shop or office counts as personal. Parked in your driveway on weekends counts as "available." This is the part that surprises people.
A Worked Example
The corporation buys a $60,000 SUV in Ontario ($67,800 with HST). You drive it 25,000 km a year, 5,000 of them personal.
| Amount | |
|---|---|
| Full standby charge: 2% x $67,800 x 12 | $16,272 |
| Reduced: x 5,000 / 20,004 (80% business, under the km limit) | $4,067 |
| Operating cost benefit: 5,000 x $0.34 | $1,700 |
| Taxable benefit added to your income | about $5,770 |
| Corporation's CCA base (passenger vehicle cap) | $39,000 plus HST on it, not $60,000 |
Drive it 15,000 km a year with 9,000 personal instead, and business use drops under 50%: no reduction, so $16,272 plus $3,060 of operating benefit, over $19,000 of taxable income for a vehicle you drive mostly for yourself. A fancy SUV with high personal use is usually cheaper to own personally.
Should the company own your vehicle?
Enter the price, lease or purchase, total and personal km and your province. The assistant compares company ownership with a personal vehicle and a per-km allowance, including the standby charge, CCA limits and GST/HST.
Option 2: You Own It, the Corporation Pays an Allowance
You keep the vehicle personally and log business trips. The corporation pays you a reasonable per-km allowance and deducts it. Paid at or below CRA's rates and based only on business km, it's tax-free to you.
| 2026 allowance rates | Provinces | Territories |
|---|---|---|
| First 5,000 business km | 73 cents | 77 cents |
| Each km after that | 67 cents | 71 cents |
20,000 business km earns $13,700 tax-free ($3,650 plus $10,050), deductible to the corporation. No standby charge, no T4 box, and you pick the vehicle you want without a CCA cap. You need a logbook; see keeping a mileage log. Don't combine a per-km allowance with the company also paying your gas, or the allowance stops being "reasonable" and becomes taxable.
Passenger Vehicle Limits, 2026
| Limit | Amount (before GST/HST and PST) |
|---|---|
| CCA cost ceiling, Class 10.1 | $39,000 (was $38,000 for 2025) |
| CCA ceiling, zero-emission (Class 54) | $61,000 |
| Lease payments | $1,100 a month |
| Loan interest | $350 a month |
A corporation's GST/HST input tax credit on a passenger vehicle is also capped at the tax on the ceiling amount; see GST/HST on business vehicles. Depreciation rules are on capital cost allowance.
The Pickup Truck Exception
A pickup with seating for the driver and two passengers, used more than 50% to transport goods or equipment, isn't a "passenger vehicle": no $39,000 cap, regular Class 10 CCA. Extended and crew cabs qualify only if used 90% or more for goods, equipment or passengers in the course of earning income at a remote or special work site. If it isn't an "automobile" for these rules, the standby charge formula doesn't apply, but personal use is still a taxable benefit based on its value. A crew cab that hauls a kayak more than lumber is a passenger vehicle.
Rules of Thumb
- Mostly business, modest price, a work truck: company ownership usually works.
- Expensive or lots of personal driving: own it personally and take the allowance.
- Keep a log either way. No log, no business-use percentage CRA will accept.
- Report the benefit. Benefits go on the T4 by the end of February, and GST/HST on the benefit is remitted by the corporation.
- Don't let personal car payments run through the company without a plan; they land in your shareholder loan account.
Self-employed rather than incorporated? See vehicle expenses for the self-employed. Other big purchases are on buying equipment through a corporation, and the corporate overview on Canadian corporate tax explained.
Corporate Vehicle Questions
Should my corporation buy my vehicle?
It depends on the price and how much you drive it personally. A mostly-business work vehicle often belongs in the company. An expensive vehicle with a lot of personal use is often better owned personally, with the corporation paying a tax-free per-kilometre allowance.
What is the standby charge?
A taxable benefit for having a company car available for personal use: 2% of the original cost per month for an owned vehicle, or two-thirds of the lease cost for a leased one. It can be reduced if business use is over 50% and personal driving is under 20,004 km a year.
What is the CRA per-kilometre rate for 2026?
73 cents per kilometre for the first 5,000 business kilometres and 67 cents after that in the provinces, and 4 cents more in the territories.
What is the operating cost benefit for 2026?
34 cents per personal kilometre, or 31 cents for employees who sell or lease cars. If business use is over 50%, you can elect in writing to use half the standby charge instead.
Is driving from home to my office business use?
No. Commuting between home and your regular place of business is personal driving.
Is a car allowance or a mileage reimbursement better?
For the employee, a per-kilometre allowance at a reasonable rate (73 cents for the first 5,000 km in 2026) is tax-free. A flat monthly car allowance is generally taxable income. Employers can deduct either.
Should my business buy or lease a vehicle?
Buying gives capital cost allowance and interest deductions, both capped for passenger vehicles. Leasing gives a deductible lease payment, also capped. The better choice depends on cash flow, how long you keep it, and business use; the tax caps often make them close.
Sources: Department of Finance, 2026 automobile deduction limits and expense benefit rates; CRA, Automobile and motor vehicle benefits. Checked October 2026. The standby charge reduction, operating cost election and pickup truck definitions are summarized from CRA's Guide T4130 as we understand it. The example ignores provincial sales tax and assumes the vehicle is available all year.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.