Is car insurance tax deductible in Canada?

With files from Rubina Ahmed-Haq

This article was originally published on February 23, 2023, and was updated on February 6, 2026.

Anyone who drives a car in Canada knows how expensive it can be. Paying for fuel, maintenance, repairs, and auto insurance all contribute to the elevated costs of car ownership. On top of regular expenses, car insurance premiums can skyrocket if you don’t have a clean driving record. Fortunately, there are ways you can recoup some of your auto insurance costs on your 2026 tax return. 

Here is what you need to know about how tax deductions for car insurance work in Canada.

What is a tax deduction?

A tax deduction is an expense you subtract from your total income to reduce the income subject to tax. Common legitimate deductions are often work expenses and medical costs (to name a few). By lowering your taxable income, tax deductions help reduce the overall amount of tax you owe.

Self-employed professionals can write off many motor vehicle expenses on their taxes, like car insurance. Some salaried employees may also take advantage of car-related tax deductions if they use their personal vehicle for work.

Who is eligible to deduct car insurance from their taxes in Canada?

Typically, self-employed Canadians and commission-based employees are eligible to deduct car insurance expenses from their taxable income. However, in some cases, salaried employees can also deduct insurance costs, provided certain conditions are met. Visit the Canadian Revenue Agency (CRA) website to learn the expenses you can deduct by employee type.

What qualifies as a tax-deductible expense for vehicles? 

According to the CRA, the following motor vehicle expenses are tax-deductible as long as the vehicle is used to earn business income: 

• licence and registration fees
• fuel and oil costs
• electricity costs for zero-emission vehicles
• insurance
• interest on money borrowed to buy a motor vehicle
• maintenance and repairs
• leasing costs

Note: If you use a vehicle for both business and personal use, you can only deduct the amount used for work. However, you can deduct the full amount of parking fees related to business use. 

The type of car you drive can impact the expenses you’re eligible to deduct. The CRA recognizes four types of vehicles: motor vehicles, passenger vehicles, zero-emission passenger vehicles, and zero-emission vehicles. If you drive a passenger vehicle, there may be limitations on how much you can deduct for capital cost allowance, interest and leasing costs. Visit the CRA website to determine whether you have a motor vehicle or a passenger vehicle, and to check for any limits that may apply. 

How do tax deductions for car insurance work in Canada?

To claim tax deductions for your car insurance, you will need to declare how many kilometres you drive in your personal vehicle each year for work. Then, use that percentage to determine how much of your car insurance you can deduct in taxes. For example, if you drive your own car 25% of the time for business, you can deduct 25% of the cost of your car insurance on your tax return.

The CRA recommends keeping a record of each business trip, including the date, destination, purpose, and number of kilometres driven. You should also record your mileage at the start and end of the fiscal year. For other expenses, like gas and repair costs, it’s best to keep your receipts. You may need proof of these expenses if you are ever audited.

How much in vehicle expenses can I deduct from my tax return?

How much you deduct is determined by how much you drive and what percentage is considered business travel. There is no limit to the kilometers you can submit on your annual taxes. But, the CRA must see it as reasonable.

It might be hard to claim you drove 100,000 km in one year as that is far above the national average, which is closer to the 15,000 to 20,000 km range. You may be asked to prove how many kilometres you drove, so keeping records of your mileage at the beginning and end of the year will help support any claims made.

Also, remember that if you claim motor vehicle expenses on your tax return, you must keep receipts for all expenses. The CRA can ask you to prove that you incurred that expense for up to six years.

The bottom line

If you drive your personal vehicle for business, you are eligible to claim your auto insurance premiums and related vehicle expenses on your tax return. The amount you can claim depends on how often you drive the car for work. Remember to keep an accurate record of all your vehicle receipts. Failure to show proof of your deductions could result in fines that far outweigh the savings the deductions provide.

Unfortunately, you cannot take advantage of tax deductions if your vehicle is used solely for personal purposes. However, you can save on insurance by regularly shopping the market and comparing car insurance quotes online.

For information about insurance and taxes, visit our insurance tax guide.

Also read

• Is business insurance tax deductible?
• Is home insurance tax deductible?
• Is life insurance taxable in Canada?
• Is health insurance tax deductible?