Business Expenses as Tax Deductions Index

Business Expenses & Tax Deductions for Canadian Businesses

Canadian business deductions.
Reasonable business expenses may be deducted - but there are rules.. Image (c) Eric O'Connell / Getty Images

This is a general list of deductible business expenses for Canadian small businesses. Click on the linked business expenses in the list to be taken to pages with more information about using that particular business expense as a tax deduction on your Canadian income tax.

Note: This list is not all-inclusive. If the item you're thinking of using as a business tax deduction isn’t on this list, that doesn't mean it’s not a legitimate business expense.

The Canada Revenue Agency (CRA) defines a deductible business expense as “any reasonable current expense you paid or will have to pay to earn business income”.

If you are operating a home-based business you must separate the business portion of expenses from personal expenses. For example, you cannot deduct all of the mortgage payment on your home or your entire electricity bill - you can deduct a portion based on the percentage of your home used for business purposes. 

As always, check with your accountant or with the Canada Revenue Agency if you’re in doubt about the tax deduction potential of a particular business expense. Being overly aggressive when deducting expenses is a sure way to attract the attention of the CRA. (See 10 Red Flags That Will Get Your Canadian Small Business Audited). Also note that in order to deduct expenses, your business must have a "reasonable expectation of profit", according to the CRA.

You cannot deduct business expenses for an indefinite period of time without your business eventually becoming profitable.

Make sure you retain all receipts for claimed business expenses - if you are audited or otherwise asked to provide receipts to support your claims and you cannot provide them your claims will likely be disallowed.

Common Business Expenses

Business Expenses and Tax Deductions Especially for Home-Based Businesses

Other Tax Deductions for Payroll Employees

Tax Credits

In addition to deductions for business expenses, there are various tax credits which your business may qualify for, including:

 

When you are working with business expenses as tax deductions, you will also want to know about Capital Cost Allowance deductions that apply to the purchase of capital assets. This page of "Tax Strategies To Maximize Your Business Tax Deductions" explains how to make the most of your Capital Cost Allowance (CCA) tax claim.

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