This page is about the company car part of the calculator (scroll down in the result). The per-km allowance at the top is for people who drive their own car, so you can ignore it here.
The example
Your employer owns a car that cost $50,000 including GST/HST and PST. It is available to you all 12 months. You drive 30,000 km in the year: 20,000 km for work and 10,000 km personal (commuting counts as personal). Your employer pays the gas, insurance and repairs.
Step 1: the standby charge
This is the benefit of simply having the car available. For an owned car it is 2% of the cost for each month: 2% × $50,000 × 12 = $12,000.
Step 2: the reduction for low personal use
You use the car more than 50% for work (20,000 of 30,000 km), and your personal driving is below 1,667 km a month (20,004 km for the year). So the standby charge is reduced in proportion: 10,000 ÷ 20,004 = 49.99%. Reduced standby charge: $5,999.
Step 3: the operating cost benefit
Because your employer pays the running costs, you also have an operating cost benefit of 34¢ per personal km: 10,000 × $0.34 = $3,400.
Step 4: add it up
$5,999 + $3,400 = $9,399 of taxable benefit, about $783 a month. It is added to your employment income on your T4 (boxes 14 and 34), and you pay income tax on it like salary.
How changes affect the benefit
| Situation (same $50,000 car) | Standby charge | Operating cost benefit | Taxable benefit |
|---|---|---|---|
| 10,000 personal km, 34¢/km (example) | $5,999 | $3,400 | $9,399 |
| 10,000 personal km, 50% election | $5,999 | $2,999 | $8,998 |
| 18,000 personal km (only 40% business) | $12,000 (no reduction) | $6,120 | $18,120 |
| Leased at $750/month instead of owned | $2,999 (⅔ × $9,000, reduced) | $3,400 | $6,399 |
The 50% election
If you use the car more than 50% for work, you can tell your employer in writing before December 31 that you want the operating cost benefit to be half of the reduced standby charge instead of 34¢ per km. In our example that is $2,999 instead of $3,400, saving $401 of taxable income. Tick the box in the calculator to compare.
Ways to lower the benefit
- Keep a careful log — the reduction depends on proving business use over 50%.
- Pay back personal operating costs within 45 days after the year ends; amounts you reimburse reduce the benefit.
- Return the car (and keys) when you are on long leave — days it isn’t available don’t count.
FAQ
What is the taxable benefit of a $50,000 company car?
Without any reduction the standby charge is $12,000 a year (2% × $50,000 × 12). With 10,000 personal km out of 30,000 it drops to $5,999, plus a $3,400 operating cost benefit, for a total of $9,399.
When is the standby charge reduced?
When you use the car more than 50% for business and drive fewer than 1,667 personal km a month (20,004 km a year). It is then multiplied by personal km ÷ 20,004.
Should I choose the 50% election for operating costs?
Compare both. In this example half the reduced standby charge is $2,999, which is $401 less than 10,000 km × 34¢ = $3,400. You must use the car more than 50% for work and notify your employer in writing by December 31.
Sources (checked 5 November 2026): Department of Finance Canada, “Government announces the 2026 automobile deduction limits and expense benefit rates for businesses”, January 14, 2026 (canada.ca/en/department-finance/news/2026/01/…); CRA guide T4130, Employers’ Guide – Taxable Benefits and Allowances (standby charge and operating cost rules); Natural Resources Canada, 2026 Fuel Consumption Guide (combined ratings); Statistics Canada monthly average retail price of regular gasoline, Toronto, September 2026 (183.7¢/L, via ycharts).