Small Business Tax Deductions in Canada

When you run a small business, you can claim certain expenses when you file your taxes. These allowable expenses may help to reduce your tax bracket, and you may owe less tax to the Canada Revenue Agency (CRA).

The business expenses you claim must be related to earning income for your small business and can’t be personal expenses. Be reasonable about the tax deductions you’re claiming, and keep a copy of your receipts.

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Common small business tax write-offs

Below you’ll find the tax-deductible items for small businesses.

Office expenses

Capital cost allowance

You can claim capital cost allowance (CCA) on business assets that depreciate over time. This includes buildings, furniture, appliances, equipment, and vehicles.

Office expenses

Small items such as paper, pens, paper clips, stationery, stamps, and envelopes are considered office expenses. Don’t include office furniture such as desks, chairs and filing cabinets, as they are capital expenditures. Claim those items under the capital cost allowance.

Prepaid expenses

These are assets paid in advance of using them. This may include insurance, advertising, rent or office equipment and supplies.

Shipping

You can deduct delivery, freight and express costs related to your business.

Supplies

You can deduct supplies that were used in your business to provide goods and services. For example, cleaning supplies that a housecleaner uses or tools used at a dentist's office.

Start-up costs

You can claim expenses that were incurred before you opened your business. However, you can only claim expenses if you operate your business in the fiscal period that the expense was incurred. Check the CRA website for additional rules as claiming start-up costs can be tricky.

Property expenses

Business-use-of-home expenses

You can deduct a certain percentage or square footage of your home that you use for work purposes. Heat, electricity, rent, mortgage interest, home insurance, maintenance, and property taxes are allowable expenses.

Insurance

This includes the commercial insurance premiums paid on buildings, machines and equipment to operate your business.

Maintenance and repairs

The labour and material costs to maintain or repair the property used for your business. You can’t deduct your own labour costs. If it has capital costs, it should be claimed under the capital cost allowance. If they pertain to your home, claim it as a business-use-of-home expense.

Property taxes

The property taxes you paid for the land or building your business operates. If it’s part of your home, deduct it under the business-use-of-home expense.

Rent

This can be rent paid for your office or a property where your business operates. If you’re deducting the rent that’s part of your home, claim that under the business-use-of-home category.

Telephone and utilities

You can claim telephone and utilities (gas, oil, electricity, water, and cable). If these costs are related to your home, you can deduct them from the business-use-of-home section.

Food and travel expenses

Convention expenses

You can deduct up to two conventions per year that are related to your business. If meals are included, you can claim 50% of the amount.

Motor vehicle expenses

You can deduct car expenses related to your small business, such as auto insurance, maintenance and repairs, leasing costs, and license fees. We've got more details on the different methods in this separate guide on vehicle expenses.

Fuel costs

This includes the fuel (gas, diesel, and propane), motor oil and lubricants used for business purposes.

Meals and entertainment

You can claim 50% of your food and beverage costs, along with entertainment expenses (such as taking a client to lunch or to a sporting event).

Travel

When travelling for business purposes, you can typically deduct 50% of your meals, hotel accommodations, and transportation costs.

Employee expenses

Salaries, wages and benefits

This includes gross salaries, Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) contributions, employment insurance (EI) premiums, and workers compensation paid to employees.

Private health insurance plans

You can deduct premiums paid to a private health service plan (PHSP) to insure your employees, yourself or your family members.

Allowances or reimbursements

You can claim the allowances or reimbursements you provided to your employees for the use of their own vehicle which they use for work purposes. If you want to know more about the specifics, we have a guide for vehicle allowance for employers.

Professional and administrative expenses

Bad debt

You can claim bad debt for any amount you’re unable to collect, which you included as an accounts receivable and income for the year.

Business tax, fees, licenses and dues

You can deduct annual license fees, business taxes, annual membership dues in a trade or commercial organization, and publication subscriptions.

Interest and bank charges

You’re eligible to claim interest incurred to borrow money or to buy property for business purposes. Check the CRA website for restrictions.

Management and admin fees

You can claim management and administrative fees, including bank charges.

Professional fees

You can deduct legal, accounting and bookkeeping fees for your small business.

Promotional advertising/marketing

You can deduct the cost of advertising in Canadian newspapers, television and radio stations. This also includes registering and hosting your website, and digital advertising.

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