Free tool

Automobile taxable benefit

Give an employee a company car and you have created taxable income for them. It comes in two parts, and the larger one has nothing to do with how much they drive.

Do you own or lease the vehicle?

Original cost, including tax

Months available to the employee

Personal kilometres in the year

Commuting between home and a regular workplace counts as personal.

Amounts the employee reimbursed you (optional)

Standby charge: $9,600.00
Operating benefit (34¢ per personal km): $5,100.00
Taxable benefit: $14,700.00

Owned vehicle: the standby charge is 2% of the original cost for each month the vehicle was available.

Personal driving is under 20,004 km, so a REDUCED standby charge may apply if the vehicle is also used more than 50% for business. That reduction is not applied here — it depends on business kilometres this tool does not ask for, and applying it wrongly would understate a taxable benefit.

How this is calculated

An employer-provided vehicle produces two separate benefits, and conflating them is the usual source of a wrong T4.

The standby charge is for having the car available, whether or not it moves. If you own it, that is 2% of the original cost for every month it is available. If you lease it, it is two-thirds of the year’s lease payments, excluding insurance. Because it is driven by cost rather than distance, it is usually the bigger number: and it is the one that surprises people.

The operating benefit covers the running costs you pay for personal driving: fuel, maintenance, insurance: at a flat per-kilometre rate applied to personal kilometres.

Anything the employee reimburses you during the year reduces the benefit. A reduced standby charge is also available when the car is used more than half for business and personal driving stays under 20,004 km in the year. This tool does not apply that reduction automatically: it depends on business kilometres, and understating a taxable benefit is the expensive direction to be wrong in.

Separately, what you can deduct is capped regardless of what you paid: capital cost is limited to $39,000.00 for a Class 10.1 passenger vehicle ($61,000.00 for a zero-emission Class 54), leasing to $1,100.00 a month, and interest to $350.00 a month.

Where these figures come from

Department of Finance Canada — 2026 automobile deduction limits and expense benefit rates , checked August 6, 2026

This tool gives an estimate from published rules and rates. It is not accounting, tax or legal advice, and it does not account for every situation: check the source above, or ask your accountant, before you act on it. Nothing you enter is stored or sent anywhere.