Operating Expense Benefit 2026: 34¢ per Kilometre or Half the Standby Charge?
For 2026, when an employer pays the running costs of a company car, the operating expense benefit equals 34¢ per personal kilometre (31¢ for employees principally selling or leasing automobiles), minus what the employee repays within 45 days after year end. An employee whose employment use exceeds 50% can instead choose, by written notice to the employer before year end, a benefit equal to half the standby charge. Electric cars such as a Tesla follow the same rules.
How is the operating expense benefit calculated in 2026?
When an employer pays the operating costs of an automobile made available to an employee, electricity included, the personal share of those costs is a taxable benefit under paragraph 6(1)(k) of the Income Tax Act. Under the per-kilometre method, every personal kilometre is valued at the rate prescribed by section 7305.1 of the Income Tax Regulations: 34¢ in 2025 and 2026, 33¢ in 2024. Employees principally selling or leasing automobiles use 31¢ (30¢ in 2024). Any amount the employee repays to the employer within 45 days after the end of the year reduces the benefit. Personal kilometres include every trip between home and a regular place of employment, as the CRA employer guide T4130 states. With 6,000 personal kilometres in 2026, the benefit reaches 6,000 × $0.34 = $2,040.00.
When can you use half the standby charge instead?
The optional method sets the operating expense benefit at 50% of the standby charge, calculated before reimbursements, minus the amounts the employee repays. An employee can use it when the automobile is used more than 50% for employment and when they notify the employer in writing before the end of the year. Without that notice, the employer applies the per-kilometre rate. Only a calculation of both amounts shows which one is lower for a given year, and both depend on the personal kilometres in the logbook.
How is the standby charge calculated?
Subsection 6(2) of the Income Tax Act sets the standby charge per automobile and per taxation year. For a car the employer owns, it equals 2% of the car's cost for each 30-day period the car is available. A leased car carries two thirds of the lease payments for the days available, minus the part that covers insurance. Reimbursements the employee pays for the use of the car reduce the charge. To count the 30-day periods (n), divide the days available by 30. When the quotient is 1 or less, it stays as an exact fraction; a larger quotient that is not a whole number is rounded to the nearest whole number, with a value exactly halfway rounded down. For a car available all year, n = 12, and February alone gives n = 28 ÷ 30 = 0.933.
How does the reduced standby charge work?
The standby charge is multiplied by A ÷ B, where B equals 1,667 km × n (20,004 km for a full year) and A equals the personal kilometres, capped at B. This reduction applies only when the employer requires the employee to use the automobile for work and the automobile is used more than 50% for employment; otherwise A equals B and the full charge stays. Personal driving at or above B also leaves the charge unreduced. A car available only in February gives B = 1,667 × 28 ÷ 30 = 1,555.9 km, and a 31-day month gives n = 1 and B = 1,667 km.
What do the numbers give for a $60,000 company Tesla?
Take a company Tesla bought for $60,000 (sales taxes included), available all year (n = 12, B = 20,004 km), used more than 50% for employment, with 8,000 personal kilometres logged in 2026 and the employer paying electricity and other running costs. The full standby charge equals 2% × $60,000 × 12 = $14,400.00. Reduced by the personal share, it falls to $14,400.00 × 8,000 ÷ 20,004 = $5,758.85. For the operating expense benefit, the per-kilometre method gives 8,000 × $0.34 = $2,720.00. Half the reduced standby charge gives 50% × $5,758.85 = $2,879.42. In this case the per-kilometre method gives the lower benefit, and the written election would raise it by $159.42. The total taxable benefit before reimbursements comes to $5,758.85 + $2,720.00 = $8,478.85.
Does an electric company car change anything?
No. Section 7305.1 prescribes one operating-benefit rate for every automobile, and the CRA employer guide T4130 states that zero-emission passenger vehicles are automobiles, so a company Tesla carries the same 34¢ per personal kilometre as a gasoline car even though charging costs less than fuel. Neither the standby charge nor its reduction has an EV exemption. The employee keeps a logbook or daily record and gives the employer a copy, as the CRA employer page asks. Odoproof builds that record from the trips your Tesla reports, vehicle by vehicle.
Sources
- Income Tax Act, section 6 Justice Laws Website (Government of Canada)
- Income Tax Regulations, sections 7305.1 and 7306 Justice Laws Website (Government of Canada)
- Automobile provided by the employer Canada Revenue Agency
- T4130 Employers' Guide: Taxable Benefits and Allowances Canada Revenue Agency
- Government Announces the 2026 Automobile Deduction Limits and Expense Benefit Rates for Businesses (January 14, 2026) Department of Finance Canada
FAQ
Is the operating expense benefit 34 cents per kilometre in 2026?+
Yes. Section 7305.1 of the Income Tax Regulations sets 34¢ per personal kilometre for 2026, unchanged from 2025, and 31¢ for employees principally selling or leasing automobiles.
When can I use half the standby charge for operating costs?+
You can use it when the car is used more than 50% for employment and you have notified your employer in writing before the end of the year. The benefit then equals 50% of the standby charge, calculated before reimbursements.
Do repayments to my employer reduce the benefit?+
Yes. Amounts you repay for operating costs within 45 days after the end of the year reduce the operating expense benefit, and reimbursements for the use of the car reduce the standby charge.
The 34¢ benefit and the reduced standby charge both depend on personal kilometres a logbook can prove. Start your 7-day free trial of Odoproof to log every company-Tesla trip automatically and give your employer the personal kilometres both methods need.
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