Canada Mileage

A mileage allowance is any payment that employees receive from an employer for using a personal vehicle to travel for work (e.g. visiting a client, not commuting between home and work).

Mileage allowances are considered tax-free if the following conditions apply:

• The mileage rate per kilometer is reasonable (see below for the defined rates);
• The allowance is based only on the number of business kilometers driven in a year;
• You did not reimburse the employee for expenses related to the same use of the vehicle. This does not apply to situations where you reimburse an employee for toll or ferry charges or supplementary business insurance if you determined the allowance without including these reimbursements.

You can find the reasonable mileage rates on the CRA’s website.

Reasonable mileage allowance rates:

In the Northwest Territories, Yukon, and Nunavut, there is an additional CAD 0.02 (or CAD 0.04 for 2023 and previous years) per kilometer allowed for travel.

In case an employer pays their employee a mileage allowance above reasonable rates, the excess should be considered taxable income.

You can find the reasonable automobile mileage rates for prior years here.