If you use your personal vehicle for business purposes as a Canadian freelancer, you can deduct the business-use portion of your vehicle costs on Form T2125. The key requirement: a mileage logbook to prove your business-use percentage to the CRA.
What Counts as a Business Vehicle Trip
Business trips include driving to client meetings, picking up supplies, attending business events, and travel required to earn income. Commuting from home to a fixed workplace is not a business trip — but if your home is your principal place of business (as it is for most work-from-home freelancers), driving from your home office to a client site is a legitimate business trip.
The Logbook Requirement
The CRA requires a mileage logbook to support vehicle expense claims. Your logbook must record for each business trip:
- Date of the trip
- Destination
- Business purpose
- Kilometres driven
Also record your odometer reading at January 1 and December 31 each year to establish total annual kilometres.
Simplified logbook method: After establishing a “base year” logbook for 12 full months, you can use a simplified logbook for subsequent years — record only for a representative three-month period and extrapolate to the full year. The business-use percentage must be within 10% of the base year for this to apply. Confirm with a CPA before using the simplified method.
Calculating Your Business-Use Percentage
Business use % = Business kilometres ÷ Total kilometres driven in the year × 100
Example: You drove 12,000 km total in 2025. 3,600 km were for business. Business use = 3,600 ÷ 12,000 = 30%.
Apply this 30% to each eligible vehicle expense to get the deductible amount.
Eligible Vehicle Expenses
- Fuel and oil
- Insurance
- Registration and licence fees
- Maintenance and repairs
- Car wash (business-use portion)
- Lease payments (for leased vehicles, with a monthly deduction limit)
- Interest on a car loan (with an annual deduction limit)
- Capital Cost Allowance (CCA) for purchased vehicles, with a cost ceiling
CCA Limits on Vehicles (2026)
The CRA sets limits on the depreciable cost of passenger vehicles:
- Passenger vehicles (Class 10.1): Maximum depreciable cost of $37,000 (before HST). CCA rate: 30% declining balance. Half-year rule applies in the year of purchase.
- Zero-emission vehicles (Class 54 or 55): Higher limits apply — $61,000 for most ZEVs in 2026. Confirm current limits at canada.ca, as these are indexed annually.
Where Vehicle Expenses Go on T2125
Vehicle expenses are reported in Part 9 of T2125 (Motor vehicle expenses). Enter your total vehicle expenses for the year, your business kilometres, and total kilometres. T2125 calculates the allowable deduction automatically based on the percentage.
Keep a separate log for each vehicle if you use more than one for business.
Frequently Asked Questions
Can I claim vehicle expenses without a logbook?
Technically you can file the claim, but the CRA will likely disallow it in an audit without a logbook. The logbook is the required documentation for vehicle expense claims. There is no accepted alternative method. If you have not been keeping one, start immediately and reconstruct as best you can from calendar entries, navigation history, and receipts.
What if I buy a new car primarily for business?
The vehicle cost ceiling (Class 10.1: $37,000 before HST) limits your CCA claim regardless of what you paid. If you paid $60,000 for a car used 80% for business, your maximum depreciable cost is $37,000 × 80% = $29,600. The Class 10.1 CCA rate is 30% declining balance with a half-year rule in year 1.
Can I deduct parking fees and highway tolls?
Yes — business-related parking fees and tolls are deductible as travel expenses (not vehicle expenses). Keep receipts or bank records showing each payment and its business purpose.