Is car insurance tax deductible in Canada?

This article was originally published on February 23, 2023, and was updated on March 7, 2025.

Anyone who drives a car in Canada knows it’s expensive. Part of those elevated costs of car ownership are due to auto insurance. In Canada, we pay some of the highest auto insurance rates in the world. On top of this, your premiums can be even higher if you don’t have a perfect driving record. But there are ways you can recoup some of those auto insurance costs on your 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.

What qualifies as a tax deductible for car insurance? 

Self-employed Canadians who use their car for business can deduct auto expenses, like insurance costs and gas, from their taxes.

Salaried or commission-based employees may also qualify for motor vehicle expense deductions — but only if they use their personal car for work and are required to travel to different locations separate from their employer’s main place of business Please note this does not include your regular daily office commuting, which is not a legitimate motor vehicle expense for tax purposes.

Other vehicle expenses you can claim

Assuming your car is required for work, vehicle expenses you can deduct from your tax return include license and registration fees, gas and oil costs, maintenance and repairs, on top of car insurance.

How do tax deductions for car insurance work in Canada?

Whether you are self-employed or a salaried employee, you can write off car insurance premiums if you drive your car for business, for example, to see clients. You will have to declare how many kilometers on your personal vehicle you drive every 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 work, you can deduct 25% of the cost of your car insurance on your tax return.

It's best to keep a running log of vehicle mileage, as it will help you to determine work-related expenses and will be vital if you get audited. Start by recording your mileage at the beginning of the tax year and then at the end. When it comes to calculating motor vehicle expenses, like gas and repairs, it’s best to keep your receipts. You may need proof of these expenses if you are ever audited.

How do you deduct vehicle expenses from your 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 seven years.

The bottom line

Owning a vehicle in Canada is not cheap, and paying for insurance is part of the car ownership experience. The truth is the cost of owning a car, including insurance premiums and maintenance fees, is only expected to rise throughout the next few years, especially amid the threats of U.S. tariffs on Canada

Though car ownership is an unavoidable expense for many, it's not all doom and gloom when it comes to your taxes. If the use of your personal vehicle is regularly required for your work, no matter if you are self employed or an employee of a company, then you have the right to expense your insurance and other related motor vehicle expenses.

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 provided.

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.

Also read

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