← All articles

Vehicle Expenses on the T2125: What Self-Employed Canadians Can Claim

2026-05-19 · 6 min read

Vehicle Expenses Are a Common T2125 Pain Point


One gap that keeps showing up in Canadian freelancer tax questions is vehicle costs: Can you deduct gas? What about insurance? Is driving to a cafe a business trip? The CRA allows self-employed Canadians to claim motor vehicle expenses, but only for the business-use portion of the vehicle.


If you use a car for client meetings, site visits, deliveries, supply runs, or business travel, those costs may belong on your T2125. If the vehicle is also used personally, you need a defensible percentage.


What Counts as Business Driving?


Business kilometres generally include trips made to earn business income, such as:


  • Driving to meet a client or prospective client
  • Visiting a job site, vendor, or supplier
  • Delivering products or documents
  • Travelling from your office to a temporary work location
  • Going to a conference, networking event, or business meeting

    • Your regular commute is not deductible. If you rent an outside office, driving from home to that office is personal commuting. If your home is your principal place of business, trips from home to client sites are more likely to qualify.


    The Formula: Business Kilometres ÷ Total Kilometres


    The CRA expects you to calculate the business-use percentage of your vehicle:


    > Business-use % = business kilometres driven ÷ total kilometres driven


    Example: you drove 18,000 km in the year and 6,300 km were for business. Your business-use percentage is 35%. You can claim 35% of eligible vehicle operating costs on your T2125.


    Expenses You Can Claim


    Once you have the business-use percentage, apply it to eligible vehicle costs, including:


  • Fuel and oil
  • Insurance
  • Licence and registration fees
  • Repairs and maintenance
  • Lease payments (subject to CRA limits)
  • Loan interest on a vehicle loan (subject to CRA limits)
  • Capital Cost Allowance (CCA) if you own the vehicle

    • Parking for a specific business trip is usually claimed separately and can be 100% business if the trip itself was business-related. Traffic tickets, speeding fines, and parking fines are not deductible.


    The Mileage Log Is Non-Negotiable


    Vehicle claims are hard to defend without a logbook. For each business trip, record:


  • Date
  • Destination
  • Business purpose
  • Kilometres driven

    • You should also record your odometer reading at the start and end of the year so you know total kilometres. A notes app, spreadsheet, or mileage app is fine. The important thing is that the record is created throughout the year, not guessed in April.


    Do Not Claim the CRA Per-Kilometre Employee Rate


    Many freelancers find the CRA automobile allowance rates and assume they can multiply business kilometres by that number. Those rates are mainly for tax-free employee reimbursements. Sole proprietors generally claim actual vehicle expenses multiplied by business-use percentage on the T2125.


    Where Vehicle Costs Go on the T2125


    Most operating costs go under motor vehicle expenses on the T2125. CCA is handled in the capital cost allowance section. Keep your receipts for fuel, repairs, insurance, loan interest, and registration, plus your mileage log.


    Make Vehicle Deductions Easier with ClaimHero


    The hard part is not the formula — it is keeping the records. ClaimHero helps Canadian sole proprietors log expenses under the right T2125 category throughout the year. Add notes for business purpose, keep running totals, and export a clean year-end summary for your return or accountant. Free to start.


    Track your T2125 expenses year-round with ClaimHero — free to start.