What business expenses can you deduct?

A practical guide for Canadian business owners

By Lil Rourke, CPA, Founder & Fractional CFO – Rourke, CPA Professional Corporation

Published November 2025 | Approx. 7-minute read

Running a business comes with many moving parts — and one of the most powerful ways to reduce your tax bill is by claiming every legitimate expense you’re entitled to. But knowing what’s deductible (and what’s not) can be confusing, especially when personal and business costs overlap.

This guide breaks down the essentials: what the CRA considers deductible, examples from real businesses, and how to stay organized so you don’t miss valuable write-offs.

1. What Does the CRA Mean by a “Deductible Expense”?

In simple terms, a deductible expense is any reasonable cost you incur to earn business income.

To qualify, the expense must:

• Relate directly to your business activities,

• Not be personal in nature, and

• Be supported by documentation (invoice, receipt, mileage log, or contract).

  
  

The CRA also expects that expenses be “reasonable in the circumstances.” For example, a graphic designer working from a home office could reasonably claim part of their rent, internet, and design software subscriptions. However, claiming a high-end DSLR camera without being able to demonstrate that it’s used for paid work would likely not be considered reasonable.

💡 Pro Tip: Keep digital or physical copies of all receipts and records for at least six years after the end of the tax year. There are excellent tools — such as Dext — that help you organize, store, and attach digital copies of receipts directly to transactions.

2. Common Deductible Business Expenses

Advertising and Promotion

Expenses that help you generate new business are deductible, including:

• Social media advertising (Facebook, Instagram, Google Ads)

• Website development and hosting fees

• Business cards, brochures, and signage

• Event sponsorships and promotional items

  
  

While most advertising expenses are fully deductible, the CRA places restrictions on certain advertising in foreign media — particularly when the content is directed primarily at Canadian audiences.

📘 For details, see the CRA’s guide to Advertising Expenses (Line 8521).

Meals and Entertainment (50 %)

When incurred for legitimate business purposes — such as meeting clients, travelling for work, or attending conferences — 50 % of the cost is deductible.

Keep a record of:

• Who attended

• Date and place

• Purpose of the meeting

  
  

Certain entertainment expenses are not deductible at all, including:

• Green fees, golf memberships, or club dues

• Gym or fitness memberships

• Tickets to sporting events or shows used primarily for recreation

• Personal meals or outings not directly tied to earning business income

💡 Tip: Only claim meals and entertainment directly connected to earning income or maintaining business relationships.

Insurance

You can deduct premiums for business-related insurance, such as:

• Commercial property or liability insurance

• Errors and omissions coverage

  
  

Personal insurance (e.g., life or home) is not deductible unless specifically related to business use.

Interest and Bank Charges

You can deduct:

• Business loan or line-of-credit interest

• Business portion of credit-card interest

• Account fees and transaction charges

Interest must relate to earning business income — not personal borrowing or investments.

💡 Tip: Keep separate bank accounts, credit cards, and lines of credit used only for business purposes. This makes bookkeeping easier and ensures that any interest incurred remains clearly deductible if reviewed by the CRA.

Business Taxes, Licences, and Memberships

Deduct the cost of:

• Business licences and annual registration fees

• Professional association dues

• Municipal business taxes or permits

  
  

Political donations or fines are not deductible.

Office Expenses

This covers small, everyday items used in your office, such as:

• Paper, pens, and stationery

• Printer ink and postage

• Office software subscriptions (like Microsoft 365 or Adobe)

  
  

Supplies

Consumable items used to deliver your product or service, such as:

• Cleaning products for a service business

• Raw materials or packaging supplies

• Tools with a short useful life

  
  

Legal, Accounting, and Professional Fees

Payments to professionals are deductible if they relate to earning business income, such as:

• Accounting, bookkeeping, and tax preparation

• Legal advice or contract review

• Consulting and advisory services

  
  

However, certain costs must be treated as capital expenditures rather than current expenses. For example, fees related to incorporating your business are deductible only up to $3,000. Any incorporation costs above that amount must be capitalized and claimed gradually over time.

💡 Tip: Keep detailed invoices that separate one-time legal setup costs from ongoing advisory or compliance services to ensure proper tax treatment.

Management and Administration Fees

Includes fees for outsourced management, administrative services, or franchise fees directly tied to operations.

Maintenance and Repairs

You can deduct costs to maintain or repair property or equipment used for business purposes (not capital improvements).For example: replacing office lighting, servicing equipment, or repainting a commercial space.

If you work from home, maintenance and repairs that relate directly to your dedicated workspace — such as repainting your office — are 100 % deductible. General upkeep of the property, such as snow removal or landscaping, must be prorated along with your other business-use-of-home expenses.

💡 Tip: Keep notes or photos showing what work was done and where — it makes your allocation clear if CRA ever asks.

Salaries, Wages, and Benefits

Employee wages, bonuses, and benefits (including employer CPP, EI, and WSIB) are deductible. Keep detailed records and T4/T4A slips for each employee or contractor.

Travel

Expenses for business travel include:

• Airfare, train, or bus fare

• Hotels and temporary accommodations

• Meals (50 % limit applies)

• Local transportation (taxis, car rentals, rideshares)

  
  

Personal or vacation travel is not deductible — and neither is the personal portion of a business trip, such as a family member’s airfare or a side trip for non-business purposes.

Telephone and Internet

Deduct the business-use portion of:

• Landline and mobile-phone plans

• Internet and data usage

Keep reasonable documentation of your allocation method, particularly for home-based businesses.

Delivery, Freight, and Express

If you ship products or materials, you can deduct delivery and freight charges, including courier services and postage.

Motor Vehicle Expenses

If you use your vehicle for business, you can deduct a percentage of:

• Fuel, oil, and repairs

• Vehicle insurance

• Lease payments or capital cost allowance (if owned)

• Parking, licensing, and tolls

  
  

Maintain a detailed mileage log to separate business and personal driving. Your log should include:

• The date of each trip

• The destination and purpose of the trip

• The total kilometres driven for business

• The total annual kilometres (business + personal) based on odometer readings at the beginning and end of the tax year, to calculate your percentage of business use

💡 Tip: Take a quick photo of your odometer on your phone at year-end — it’s an easy way to maintain proof if CRA ever asks.

CRA accepts either paper or digital mileage logs. Apps such as MileIQ or TripLog can make tracking effortless. Accurate, ongoing records are essential to support your vehicle deduction.

Capital Cost Allowance (CCA) and Purchasing Capital Assets

Large purchases that provide lasting benefit — such as computers, furniture, vehicles, or equipment — are considered capital assets. Instead of deducting the full cost in one year, you claim Capital Cost Allowance (CCA) over time to reflect depreciation.

Examples of capital assets include:

• Computers and office furniture

• Manufacturing or kitchen equipment

• Vehicles used for business purposes

• Leasehold improvements

  
  

Each type of asset falls into a CCA class with a specific depreciation rate (e.g., Class 10 for vehicles at 30 %).

💡 Tip: Keep invoices and payment records for all asset purchases — and track additions and disposals by class to support your CCA claim.

Business-Use-of-Home Expenses

If you operate your business from home, you may be eligible to deduct a portion of household costs. Deductible expenses include:

• Rent or mortgage interest

• Property taxes and utilities

• Internet and home insurance

• Minor repairs and maintenance

  
  

Only expenses related to the workspace used regularly and exclusively for business can be claimed. You can calculate your deduction based on the percentage of square footage or time used for business.

🏠 For detailed rules, see the CRA’s “Business-use-of-home expenses” guide.

3. What You Can’t Deduct

Some costs may feel “business-related” but are considered personal or capital in nature.

The CRA disallows:

• Personal living expenses (groceries, clothing, grooming, etc.)

• Penalties or interest on late tax payments

• Capital loan repayments (the interest may be deductible, not the principal)

• Expenses that cannot be supported by documentation

4. How to Keep Your Books Organized (Without Losing Your Mind)

Accurate record-keeping is the foundation of good tax planning. But that doesn’t mean you need a complicated accounting system from day one.

If your business has simple, low-volume transactions, a spreadsheet may be all you need. To make it easy, we’ve created a Free Bookkeeping Template (Excel) designed specifically for small-business owners who want to track income and expenses throughout the year.

👉 Download the Free Bookkeeping Template

This template is ideal for businesses such as:

• Freelancers and consultants

• Home-based service providers

• Early-stage start-ups or sole proprietorships

It helps you stay organized, see where your money is going, and ensure you don’t overlook deductible expenses at tax time.

⚙️ When It’s Time to Level Up

As your business grows, transactions multiply and bookkeeping becomes more time-consuming — spreadsheets start to break down. That’s when cloud accounting software becomes the smarter choice.

Our team at Rourke, CPA can help you:

• Set up and integrate your accounting software

• Automate expense tracking, bank feeds, and HST reporting

• Review your financials for accuracy and insight

• Provide ongoing bookkeeping, tax, and fractional CFO services so you can focus on growth

If your bookkeeping is taking too much time or creating stress — that’s the signal to bring in help.

5. Final Thoughts

Knowing what’s deductible — and tracking it properly — isn’t just about paying less tax. It’s about understanding how your business spends money, managing cash flow, and planning for growth with clarity.

At Rourke, CPA, we help Canadian business owners at every stage — from start-up to expansion — build a strong financial foundation.

📞 Let’s talk about your business. Book a discovery call to explore how we can simplify your bookkeeping, uncover tax opportunities, and help your business grow with confidence.

Book a Discovery Call