The CRA Mileage Rate 2025 has been announced by the Canada Revenue Agency (CRA), effective January 1, 2025, providing a standard for reimbursing employees who use personal vehicles for business purposes. Set at 72 cents per kilometre for the first 5,000 kilometres and 66 cents thereafter, these rates help employers and employees calculate tax-free allowance amounts while ensuring CRA compliance. In this article, we’ll explore the CRA Mileage Rate 2025, how it works, eligibility, and tips for maximizing business travel expenses deductions.
What Is the CRA Mileage Rate 2025?
The CRA Mileage Rate 2025 is a per-kilometre allowance set by the CRA to reimburse employees for using personal vehicles for work-related travel. It accounts for vehicle operating costs like fuel, maintenance, insurance, and depreciation. For 2025, the rates are:
- Provinces: 72 cents per kilometre for the first 5,000 kilometres, then 66 cents per kilometre.
- Northwest Territories, Yukon, Nunavut: 76 cents per kilometre for the first 5,000 kilometres, then 70 cents, due to higher costs from harsh climates and limited infrastructure.
These rates, up 2 cents from 2024, reflect rising fuel prices and inflation. The higher rate for the first 5,000 kilometres covers fixed costs like insurance, while the lower rate accounts for reduced variable costs thereafter. Employers can use these rates for tax-free allowance reimbursements, provided they meet CRA guidelines.
Who Can Use the CRA Mileage Rate 2025?
The CRA Mileage Rate 2025 applies to:
- Employees: Those using personal vehicles for business tasks, such as client meetings or deliveries, can receive tax-free reimbursements if the employer uses CRA rates.
- Employers: Businesses can reimburse employees at these rates without deducting CPP, EI, or income tax, and claim the expense as a tax deduction.
- Self-Employed: While self-employed individuals cannot use the mileage rate directly, they can claim actual vehicle expenses (e.g., fuel, repairs) based on the business-use percentage, requiring detailed logs.
Reimbursements are tax-free only if they align with CRA rates and are for business purposes, excluding daily commutes. Employers aren’t obligated to use these rates but doing so ensures compliance and tax benefits.
How to Apply the CRA Mileage Rate 2025
To use the CRA Mileage Rate 2025 effectively:
- Track Mileage: Maintain a CRA-compliant logbook with trip dates, destinations, purposes, and kilometres driven (business and personal). Apps like Timeero or MileIQ automate this process.
- Calculate Reimbursement: Multiply business kilometres by the appropriate rate. For example, 4,000 km at 72 cents = $2,880; 2,000 km at 66 cents = $1,320; total = $4,200.
- Submit Documentation: Employees must provide logbooks to employers; self-employed individuals need logs and receipts for tax deductions, kept for six years.
- Update Policies: Employers should align reimbursement policies with 2025 rates to ensure CRA compliance and accurate budgeting.
Non-compliant reimbursements (e.g., flat-rate allowances) are taxable and reported on T4 slips.
Why the CRA Mileage Rate 2025 Matters
The CRA Mileage Rate 2025 simplifies expense tracking and ensures fair compensation for business travel expenses. Key benefits include:
- Tax-Free Reimbursements: Employees avoid taxes on allowances matching CRA rates, and employers can deduct these as business expenses.
- Cost Reflection: Rates account for rising vehicle operating costs, like fuel and maintenance, ensuring fairness.
- Northern Adjustment: Higher rates in northern territories address unique challenges like harsh weather and high fuel costs.
The CRA reviews rates quarterly, guided by the National Joint Council, to reflect economic changes like inflation and fuel prices.
Tips for Maximizing Deductions with CRA Mileage Rate 2025
To optimize tax deductions and reimbursements:
- Use Automated Tools: Apps like Driversnote or TripLog provide CRA-compliant mileage tracking, reducing errors compared to manual logs.
- Verify Business Use: Exclude commutes and personal trips from claims. Use GPS features to distinguish business travel.
- Check Other Deductions: Employers can reimburse gas, parking, or tolls up to 35 cents per kilometre tax-free; self-employed individuals can claim capital cost allowances (CCA) up to $38,000 for vehicles or $1,100/month for leases.
- Consult Professionals: Work with an accountant to ensure compliance and maximize deductions, especially for complex cases.
FAQs
The rate is 72 cents per kilometre for the first 5,000 kilometres, then 66 cents per kilometre thereafter.
Reimbursements at CRA rates for business travel are tax-free and not reported on T4 slips. Non-compliant rates are taxable.
No, they must claim actual expenses based on business-use percentage, supported by logs and receipts.
Higher costs due to harsh weather, limited infrastructure, and elevated fuel prices justify an additional 4 cents per kilometre.
Use a logbook or app to record trip details (date, destination, purpose, kilometres). Keep records for six years.