CRA Mileage Rate 2026 & IRS Rates: Why Standard Mileage Beats Manual Calculations
Jan 18
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Most self-employed drivers, gig workers, and business owners think they can beat the CRA mileage rate 2026 (72¢/km standard rate) or the IRS's 72.5¢/mile standard rate by manually tracking every gas receipt, repair bill, and maintenance expense. They're wrong—and they're leaving thousands of dollars in deductions on the table.
Here's why: the standard mileage rate is deliberately designed to exceed the actual per-mile cost of driving because it includes hidden expenses most drivers never track or even realize they're incurring—depreciation, insurance, registration, interest on financing, and dozens of minor costs that add up quietly over the life of a vehicle.
In this complete guide, you'll learn exactly which costs are baked into the standard rate that most drivers forget to claim, real examples showing why the standard method almost always wins for high-mileage driving, and how Fuelshine helps you stay audit-proof while capturing every deductible kilometre.
The Standard Mileage Rate: What You Need to Know
CRA 2026 Standard Kilometric Rates
The Canada Revenue Agency sets standard rates annually that reflect the true average cost of operating a personal vehicle in Canada, including all fixed and variable costs:
72¢ per kilometre for the first 5,000 business km
66¢ per kilometre for each km after 5,000
+4¢ per km in territories (Northwest Territories, Yukon, Nunavut)
IRS 2026 Standard Mileage Rate
The Internal Revenue Service sets the business standard mileage rate to reflect average vehicle ownership and operating costs:
72.5¢ per mile for business use (2026)
What's Hidden Inside the Standard Rate: The Costs You Don't Track
Here's the critical difference: the standard rate is not just fuel. It includes seven major cost categories, most of which drivers chronically underestimate or completely forget to track when calculating actual expenses:
1. Depreciation – The Biggest Hidden Cost
Depreciation is often the single largest vehicle expense, yet most drivers never claim it because they don't understand how it works.
How it works:
A car loses value every year it's owned
The CRA and IRS allow you to deduct that lost value as a business expense
A $30,000 car loses $3,000–$4,500 instantly when you drive it off the lot (10–15% depreciation).
Example:
You buy a car for $30,000
It's worth $24,000 after year 1 (20% depreciation in year one, declining thereafter)
Depreciation cost: $6,000 in year 1
If you drive it 60% for business, you can deduct $3,600 in depreciation alone
Why drivers miss this:
Depreciation isn't a cash expense—you don't write a check
Calculating it requires IRS Section 179 or MACRS depreciation schedules, which are complex
Many drivers don't realize it's deductible at all
The standard mileage rate automatically captures your share of depreciation without requiring you to do any calculations.
2. Insurance – A Fixed Annual Cost Most Drivers Underestimate
Business vehicle insurance is often higher than personal-use insurance because insurers know commercial use increases risk.
Example:
Personal auto insurance: $1,200/year
Business auto insurance: $2,000+/year
Annual difference: $800+
If you drive your car 70% for business, your deductible insurance is roughly $1,400 ($2,000 × 70%)—but if you're using the actual expense method and forget to include insurance entirely, you lose that deduction.
The standard mileage rate includes insurance costs for you, automatically.
3. Loan Interest and Financing Charges
If you financed your vehicle with a loan or lease, the interest paid on that loan is deductible as a business expense—but many drivers don't know this or forget to track it.
Example:
5-year loan on a $30,000 vehicle at 5% interest
Total interest paid: ~$4,000 over 5 years
Annual average: ~$800/year
Deductible portion (70% business): ~$560/year
Again, the standard rate bakes this in automatically, while the actual expense method requires you to:
Calculate or look up the principal vs. interest breakdown
Determine the business-use percentage
Claim the right amount on your tax form
4. Vehicle Registration, Licensing, and Inspection Fees
These are recurring annual costs that are deductible, but they're easy to forget:
Vehicle registration: $150–$400/year (varies by province/state)
Vehicle inspection: $50–$150/year
Emissions testing: $25–$75
License plate renewal: varies
Total recurring annual: ~$300–$500
The standard rate captures these automatically.
5. Routine Maintenance (Oil Changes, Filters, Belts)
These are deductible, but drivers often forget them because they're small, recurring expenses spread throughout the year.
Example:
Oil change every 5,000 km: ~$40–$75 per change (let's say 4–6 per year = $200–$400)
Air filter replacements: $30–$50 per year
Transmission fluid: $100–$200 per year
Coolant, brake fluid flushes: $150–$300 per year
Annual routine maintenance: ~$500–$800 for most vehicles
The standard rate includes this, while actual expense filers need to track every service receipt.
6. Repairs Beyond Routine Maintenance
Unexpected repairs (brake pads, suspension, alternator replacement, etc.) vary year to year but are deductible:
Brake pad replacement: $200–$400
Battery replacement: $100–$300
Suspension or steering work: $400–$1,000+
Transmission problems: $1,000–$4,000+
The standard mileage rate doesn't directly capture major repairs, but over a vehicle's lifetime, the average is baked into the per-mile rate so that the rate covers both good repair years and expensive years.
Actual expense users might have a low-repair year (missing deductions) or a year with a major repair that inflates their deduction, making it inconsistent.
7. Fuel and Oil – The One Cost Everyone Tracks (But Still Underestimates)
Fuel is obvious, but even here, drivers miss opportunities:
Modern cars average 6–8 litres per 100 km
At $1.50/litre (Canada 2026), that's $0.09–$0.12 per km in fuel alone
Premium fuel, high-mileage vehicles, or inefficient driving raises this to $0.12–$0.18/km
Most drivers track fuel, but the standard rate also includes the cost of oil, additives, and other fluid top-ups throughout the year.
Real Example: Why Standard Rate Crushes Manual Calculations
Let's use a realistic Canadian scenario: a self-employed sales representative driving 20,000 business kilometres in 2026.
Scenario: Sales Rep, Toyota Corolla, 20,000 business km out of 25,000 total (80% business use)
Method 1: Standard Mileage Rate (CRA)
Deduction=(5,000×$0.72)+(15,000×$0.66)=$3,600+$9,900=$13,500Deduction=(5,000×$0.72)+(15,000×$0.66)=$3,600+$9,900=$13,500
Tax savings (at 30% marginal rate): $4,050
Method 2: Actual Expenses (Detailed Tracking)
Annual vehicle costs:
Fuel (5,000 km/litre ÷ 7 L/100km): $2,140 (20,000 km × $0.107/km)
Insurance: $1,600 (business portion only)
Loan interest (3-year remaining on $20,000 at 5%): $700
Registration and fees: $350
Routine maintenance (oil, filters): $400
Repairs (tires, battery, suspension, averaging out): $800
Total annual vehicle costs: $5,990
Business-use percentage: 80%
Deductible expenses=$5,990×0.80=$4,792Deductible expenses=$5,990×0.80=$4,792
Tax savings (at 30% marginal rate): $1,438
The Difference
Standard rate deduction: $13,500Standard rate deduction: $13,500Actual expenses deduction: $4,792Actual expenses deduction: $4,792Difference: $13,500−$4,792=$8,708 MORE deduction with standard rateDifference: $13,500−$4,792=$8,708 MORE deduction with standard rateExtra tax savings with standard rate: $8,708×0.30=$2,612Extra tax savings with standard rate: $8,708×0.30=$2,612
That's $2,612 in extra tax savings just by using the standard rate instead of tracking actual expenses.
Why Did the Actual Expense Method Come Up So Short?
The actual expenses total ($5,990) is significantly lower than the standard rate would suggest because:
Depreciation wasn't included – many drivers don't claim it because it's complex. That's easily $2,000–$3,000 per year on a newer vehicle.
Financing interest was underestimated – only the final 3 years of a loan were included; earlier years had higher interest.
Repair costs averaged low – a major transmission or engine repair could spike this to $6,000+ in a single year.
Insurance was conservative – doesn't account for increases due to claims, age, or zone changes.
The standard rate is designed to handle all these variables automatically and fairly.
When Actual Expenses Might Beat Standard Mileage
There are specific scenarios where the actual expense method can win:
1. Low-Mileage Drivers With High Expenses
If you drive fewer than 5,000 business miles/km per year but have major vehicle costs (expensive repair, lease payment):
3,000 business miles + $8,000 in annual vehicle expenses
Actual: $8,000 × 50% business use (assuming 6,000 total miles) = $4,000 deduction
Standard: 3,000 miles × $0.725 = $2,175 deduction
In this case, actual expenses win by $1,825.
2. Expensive Vehicles With High Depreciation
A luxury or specialty vehicle might have much higher depreciation and maintenance costs than the standard rate assumes.
High-end vehicle with $6,000 annual depreciation, $2,500 insurance, etc.
Total annual costs: $15,000
50% business use = $7,500 deduction
Standard mileage (10,000 business miles): 10,000 × $0.725 = $7,250
Actual expenses barely wins here, and only because of the expensive vehicle.
3. Recent Major Repairs
A year with a $3,000–$5,000 major repair (transmission, engine work) can inflate actual expenses enough to exceed standard mileage, but this advantage disappears in years without major repairs.
The CRA and IRS Designed These Rates on Purpose
The standard mileage rates are not arbitrary—they're calculated by government agencies using real-world fleet data and cost studies to reflect average vehicle ownership and operation costs across thousands of vehicles.
How the CRA Sets Its Rates
The CRA adjusts rates quarterly based on:
Fuel prices (as they fluctuate)
Insurance cost indices (averaging across the country)
Maintenance and repair costs (from industry surveys)
Vehicle depreciation trends (as new and used car values change)
Interest rates (affecting financing costs for vehicle purchases)
The resulting rate is meant to be fair and reasonable for both employers (who reimburse employees) and tax authorities (who audit claims).
Why Drivers Still Choose Actual Expenses
Despite the data, some drivers still use actual expenses because:
They believe their vehicle is cheaper than average – often mistakenly
They don't understand depreciation – and don't claim it, severely limiting their deduction
They had a major repair year – inflating their actual expense for that year only
They want to control every detail – even though it's more complex and often yields less
The math, however, consistently favors standard mileage for high-mileage drivers.
The "First Year" Rule: Critical for Your Choice
There's an important IRS rule that trips up many drivers:
If you choose the actual expense method in the first year you use a vehicle for business, you're locked into it for the life of that vehicle. You cannot switch to standard mileage later.
Conversely, if you start with standard mileage, you can switch to actual expenses in future years (though you generally shouldn't, since standard usually wins).
This means: If you're unsure, start with standard mileage, calculate both methods each year to see which wins, and switch to actual expenses only if it genuinely exceeds the standard rate by a meaningful margin.
How Fuelshine Helps You Maximize Deductions Without Tracking Every Receipt
Fuelshine solves the real problem: capturing every single deductible kilometre or mile so your standard mileage deduction is rock-solid and audit-proof.
Why Accurate Mileage Matters
The standard mileage deduction only works if you can prove your business miles/km with a detailed, contemporaneous log.
Miss 2,000 km in a year?
At 70¢/km, that's a $1,400 lost deduction or $420 in tax at 30% rate.
Most drivers underestimate their mileage by 10–25% because they forget deadhead trips, multi-stop routes, and miles between platforms.
How Fuelshine Captures Every Mile
Automatic GPS tracking runs in the background
Zero manual effort – just tap to classify trips
Generates audit-proof mileage logs with timestamps and route maps
Exports CRA- and IRS-compliant reports ready for your accountant
Additional Benefits
Beyond mileage tracking, Fuelshine also:
Tracks eco-driving to reduce fuel waste by 10–25%
Monitors trip profitability (km per dollar earned)
Awards EcoPoints for safe, efficient driving
Combined, you get higher deductions (via accurate mileage) + lower fuel costs (via eco-driving) + rewards (via EcoPoints) – three angles of financial advantage.
Frequently Asked Questions (FAQs)
Q1: Why doesn't the standard mileage rate capture major repairs?
The standard rate is designed as an average across many vehicles over many years. Some years have no major repairs; others have $3,000–$5,000. Over a vehicle's lifetime, the standard rate accounts for this average. In a repair-heavy year, actual expenses might be better, but in most normal years, standard mileage is superior.
Q2: If I choose actual expenses, can I switch back to standard mileage?
Not easily. If you use actual expenses in the first year a vehicle is used for business, you're generally locked in for the life of that vehicle. Always start with standard mileage and switch to actual expenses only if it clearly benefits you.
Q3: What if I use multiple vehicles for business?
Each vehicle can have a different method, though mixing methods across vehicles is more complex. In Canada, employees would typically use the standard mileage rate for employer reimbursement, while self-employed can choose separately for each vehicle.
Q4: Does the standard rate include parking and tolls?
No. Parking fees and tolls are claimed separately in addition to the standard mileage rate, regardless of which method you use. Keep receipts for these separately.
Q5: Why is depreciation so hard to understand?
Depreciation can be claimed using Section 179 (first-year write-off), MACRS (accelerated depreciation), or standard depreciation (slow, straight-line). It's complex because the rules differ by vehicle type, purchase date, and business use percentage. This complexity is precisely why the standard mileage method is attractive—it handles depreciation automatically without forcing you to master tax code.
Q6: Can I use the CRA standard rate to claim actual expenses on my Canadian taxes?
No. The CRA standard rate is a "reasonable allowance" benchmark, not a deduction amount itself. If you receive a reimbursement at the CRA rate, it's tax-free but you can't deduct it again. If you want to claim more, you'd need to use the actual expense method and prove you spent more.
Q7: What about fuel efficiency? Doesn't eco-driving reduce the standard deduction?
No. The standard mileage rate is fixed by the CRA/IRS and doesn't change based on how efficiently you drive. If you use fewer litres due to eco-driving, you still claim the full standard mileage rate per km/mile. This is one reason high-mileage drivers win with standard mileage: they deduct the fixed rate regardless of efficiency, while gaining cash savings from driving better.
Q8: Is there a difference between employee and self-employed for the standard rate?
Employees receive a tax-free allowance from their employer at the CRA/IRS rate; they don't claim a deduction themselves (it's pre-tax). Self-employed claim a deduction using the standard rate on their tax return. The rate is the same, but the mechanism differs.
Q9: What if I drive less than the threshold (first 5,000 km in Canada)?
You still use the CRA rate—72¢/km for the first 5,000 km, even if you drive fewer. So 3,000 km × $0.72 = $2,160 deduction.
Q10: Can I claim the standard rate if I don't have a detailed mileage log?
No. The CRA and IRS both require a contemporaneous mileage log showing date, destination, purpose, and km/miles for business trips. Without it, you risk losing the entire deduction in an audit. Apps like Fuelshine make this automatic.
The Standard Mileage Rate Is the Default Winner
For the vast majority of high-mileage drivers—gig workers, sales reps, field service providers, and self-employed professionals—the standard mileage rate provides a larger, simpler, and more defensible tax deduction than manual tracking of actual expenses.
The math is clear: the CRA's 72¢/km (first 5,000 km) and 66¢/km rates and the IRS's 72.5¢/mile are designed to exceed the actual per-mile costs for most vehicles driven in normal patterns, capturing depreciation, insurance, financing, maintenance, repairs, and fuel automatically.
To maximize this advantage:
Use the standard mileage method (especially if you drive 10,000+ km annually)
Keep a detailed, contemporaneous mileage log showing every business trip
Claim parking and tolls separately
Use Fuelshine to automate mileage tracking and capture every km
Combine with eco-driving to reduce real fuel costs and earn rewards
The combination of standard mileage deductions + fuel savings + eco-driving rewards gives you three layers of financial benefit that manual expense tracking can never match.
Download Fuelshine today on iOS or Android, start tracking every business kilometre, and maximize your standard mileage deduction while cutting your actual fuel costs by 10–25% with eco-driving rewards.