Tax Deductible Business Expenses

Rebecca Rustin
Business owner taking a phone order

You can help ease your financial burden by writing off business expenses. Here are a few guidelines from the CRA on deducting business expenses.

What kind of business expense is tax deductible?

You can deduct many expenses you incurred to earn business income. There are limits on deducting capital expenses and GST/HST amounts. These come with specific allowances for these costs.  The CCA (capital cost allowance) allows business owners to deduct the cost of depreciable assets over time. The input tax credit lets you recover GST/HST incurred over the course of commercial activities.

What does the CRA consider eligible business expenses?

The CRA says you can deduct these expenses for your business:

  • Advertising
  • Business start-up costs
  • Office expenses
  • Business tax, fees, licenses and dues
  • Business use-of-home expenses
  • Insurance
  • Interest charges.

Let's go over what some typical costs in these categories will include.

What advertising expenses can you deduct?

Expenses incurred for ads including those placed in Canadian media are deductible. You can also deduct finder's fees and business card expenses.  Ads aimed at Canadian consumers but placed in foreign media outlets are not deductible.  If you advertise in a magazine or other printed publication that's Canadian:

  • You can deduct the entire expense when original editorial content makes up 80 percent or more of non-advertising content
  • You can deduct 50 percent of the expense if original editorial content makes up less than 80 percent of the non-advertising content.

What business start-up costs can you deduct?

The CRA stresses the importance of determining exactly when business activity started. That way, you can make the correct deductions. Purchasing an existing business means reporting the date when the transfer of ownership took place.  For start-ups, the starting date may be harder to pin down. Choose a date when you started specific activities to begin earning income from your business.

What business tax, fees, licenses and dues can you deduct?

In this category, you can deduct:

  • Any annual license fees and business taxes
  • Annual dues or fees form membership in a trade or commercial association.

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What business use-of-home expenses can you deduct?

The CRA recommends determining how much time and space is dedicated to your home-based workspace. You can then deduct the correct portion of expenses related to:

  • Heat
  • Electricity
  • Insurance
  • Maintenance
  • Mortgage interest
  • Property taxes.

What insurance costs you can deduct?

Deductible commercial insurance premiums include those incurred on:

  • Buildings
  • Machinery
  • Equipment.

Report your car insurance separately with other motor vehicle expenses.

What interest charges can you deduct?

You can deduct the interest on loans you've taken to buy property or to help your business.  Limits apply to loans for vacant land or passenger vehicles.

What office expenses can you deduct?

You can deduct the costs of small everyday things such as:

  • Pens
  • Paperclips
  • Pencils
  • Stationery
  • Stamps
  • Printer paper.

Larger items like furniture or filing cabinets are capital expenses. GST/HST amounts incurred on deductible items are eligible for the input tax credit.