Small business owners can deduct most reasonable expenses incurred to earn business income, including office supplies, equipment, vehicle costs, professional fees, and home office expenses. The Canada Revenue Agency (CRA) allows you to claim any expense that was "reasonable in the circumstances" and directly related to earning income. To qualify for deductions, you must keep receipts and records for at least six years, and the expense cannot be a personal or capital item (like buying land or a building). The key rule is this: if you spent money to produce income for your business, this CRA rule may apply to you. If you operate a small business, these expense categories are often deductible: - Office supplies and materials (pens, paper, software, notebooks) - Professional services (accounting, legal fees, consulting) - Advertising and promotion (website, social media, business cards) - Vehicle and travel expenses (fuel, maintenance, mileage) - Home office costs (utilities, rent, property tax allocation) - Equipment and tools (computers, machinery, furniture under $500) - Subscriptions and memberships (industry associations, software licenses) - Insurance (business liability, professional indemnity) - Meals and entertainment (50% of costs for business meetings) - Telephone and internet (business portion only) The CRA doesn't require you
You can only deduct the business portion of shared expenses. For example, if you use your phone 70% for business and 30% personally, you can deduct 70% of the bill. Keep records showing the business vs. personal split.
A deduction reduces your taxable income (saving you tax at your marginal rate), while a credit directly reduces the tax you owe. Deductions are generally more valuable for high-income earners.
Yes. The CRA requires original receipts or invoices for all deductions. If you can't find a receipt, you may lose the deduction if audited. Keep records for at least six years.
Equipment costing $500 or less in a year can be fully deducted. Items over $500 are claimed as capital expenses through capital cost allowance (CCA) over several years.
Yes, payments to independent contractors are deductible business expenses. You must issue a T4A or T4 slip if required, depending on the contractor's income level and residency status.