Yes, you can deduct supplies and materials that you use directly in your small business operations, as long as they are reasonable, necessary, and you have proper documentation. The CRA considers supplies to be items that are consumed or used up in the course of doing business, such as office stationery, cleaning products, software licenses, or raw materials for production. Unlike equipment that lasts more than a year, supplies are typically fully deductible in the year you purchase them. Supplies and materials are business expenses that get "used up" relatively quickly. This CRA rule may apply to you if your business uses items like: Office supplies (paper, pens, folders, ink cartridges) Raw materials for manufacturing or assembly Software subscriptions and digital licenses Cleaning and maintenance supplies Safety equipment (hard hats, gloves, safety glasses) Packaging materials for shipped products Postage and shipping labels Printer toner and replacement parts Fuel for equipment (not vehicles) Tools under $500 that wear out The key distinction is that these items must be consumed as part of your business operations. If something lasts indefinitely or is a significant asset (like furniture or machinery), it likely falls under capital equipment and may need to be depreciated instead.
Supplies are consumed or used up quickly (usually within a year) and are fully deductible in the year you buy them. Capital equipment lasts longer than one year and must be depreciated over time using Capital Cost Allowance (CCA) rules.
Yes, you must keep receipts for all business expenses, even small ones, for at least six years. The CRA doesn't require you to submit them with your tax return, but you need them if your return is audited.
Yes, monthly or annual software subscriptions that support your business operations are fully deductible as supplies in the year you pay for them. This includes accounting software, design tools, and productivity apps.
The CRA doesn't have a fixed dollar amount, but tools under $500 that are expected to wear out or be replaced regularly may be deducted as supplies. Tools over $500 or those expected to last many years should be capitalized and depreciated.
If you require specialized work clothing for your business that you don't wear outside work (like chef whites, safety vests with your logo, or specialized uniforms), these may be deductible. Standard everyday clothing is not deductible.