What you can (and cannot) write off as a business expense

Being self-employed and running your own business can have plenty of perks — after all, who doesn’t like being their own boss and setting their own hours? Yet it also comes with of its own unique responsibilities, especially around tax time. Without an employer who automatically take taxes owed off your paycheque, it’s up to you as a business owner to calculate and pay your yearly amount owing to the Canada Revenue Agency (CRA).  

To ease the tax burden, business owners can deduct a wide range of potential business expenses, from office supplies to utility costs. However, understanding what’s deductible—and what isn’t—can be tricky, and getting it wrong and claiming the wrong expenses or deducting too much can get you in trouble with the CRA.  

To ensure you successfully maximize your deductions and avoid common pitfalls, we explore what self-employed and small business owners need to know about claiming expenses on your taxes.  

What can you claim as a business expense? 

Remember: because you don’t have an employer with a finance or accounting team, you’re responsible for calculating your taxes and claim the appropriate business costs. Ensuring you deduct all possible eligible expenses from your taxable income can significantly reduce your tax bill. Here are some of the most common eligible expenses for self-employed and small business owners: 

Common business costs you can deduct  

A good rule of thumb to keep in mind is that you can only deduct expenses that are necessary to get your business up and running and to keep it operational. The CRA recommends that you hold onto receipts or other forms of proof for any expenses for seven years — they may ask for these documents if you’re ever audited.  

Office and operational Costs  

• Everyday office supplies like pens and paper. 
• Tax support like an accountant or tax preparation software. 
• Business insurance premiums—including commercial property insurance, professional indemnity and liability insurance—are considered necessary operational costs and can be written off.  
• Larger purchase like computers, furniture, buildings, or operational equipment that depreciates over time can be deducted using the Capital Cost Allowance (CCA). You’re not allowed to deduct the full cost of something like a computer or office furniture in one year but must deduct a portion of its cost annually based on the CRA’s CCA rules. This process can be complicated because there are very specific rules about what depreciation calculations you’re supposed to use. If you’re worried you’ll get it wrong, it may be best to consult an accountant.  

Rent and utilities 

• The cost of renting office space or a coworking space membership 
• Telephone and utilities such as electricity, heat, water and internet.  
• If you work from home, you can claim a percentage based on the square footage used exclusively for business (see more info in mixed-use expenses below) 

Related: What Canadian homeowners can claim on their taxes in 2025 

Travel and entertainment deductions 

Travel expenses can be deducted – however, not that these deductions are often abused. Be careful you don’t include personal expenses or the CRA may want to audit your return. 

• Self-employed individuals and business owners are permitted to deduct 50% of the cost of meals and entertainment that are directly tied to running your business (for example, a meal out with clients to discuss work).  
• Car costs: If you drive for business, your car insurance can be claimed as a motor vehicle expense. You may also be able to claim round-trip mileage and parking. (See the mixed-use section below for more detail). 
• A portion of your travel insurance may also be deducted as long as you travel to incur business income and not for pleasure.  
• You can deduct the cost of two conferences per year. 

Miscellaneous expenses 

Other potential allowable expenses include: 

• Advertising and marketing to promote your business 
• Membership/professional fees related to your work 
• Shipping costs 
• Interest (on things like business loans) and bank fees 
• Bad debts: Money you previously included in your business income (because you expected to receive payment) but later proved to be uncollectible 

Mixed-use expenses 

Mixed use expenses can be somewhat confusing as they are more complex and require more care when calculating eligible amounts.  

Vehicle expenses 

You can claim the following vehicle expenses as long as you use it to earn business income. 

• Licence and registration fees 
• Fuel and oil costs 
• Electricity costs for electric vehicles 
• Interest on loans to buy a motor vehicle 
• Maintenance and repairs 
• Leasing costs 
• You can also potentially claim some part of the cost of your car purchase (but would have to do so according to the CCA rules).  
• Insurance premiums for your commercial vehicle or commercial fleet. 

Related: Do I need fleet insurance for my small business? 

If you drive a car for both personal and business use, the CRA has a complex and strict process for determining what portion of vehicle expenses you can claim. That’s because you can only claim expenses directly related to your business.  

You must calculate the percentage of kilometers driven for business against total personal kilometers driven during the year and formally track your relevant mileage on a simplified or full logbook as described by the CRA. Be fastidious in your logging as otherwise excessive or unsupported deductions may trigger an audit. 

Home office expenses 

If you use part of your home exclusively for business purposes, you can deduct a percentage (based on the percentage of workspace you used divided by the total area of your home) of home-related costs such as rent, utilities (electricity, heat, water, internet), property taxes, mortgage interest (not principal payments), home insurance and maintenance.  

Personal costs you can't write off  

Here are some examples of personal expenses you’re not allowed to claim.  

• Parts of your home you don’t exclusively use to run your business 
• Clothing 
• Commuting costs 
• Fines (like parking tickets) 

Related: Tenant insurance safeguards your stuff — and your peace of mind 

Common myths about business deductions

Here are some common misunderstandings about what you can and can’t claim: 

Myth:

You can deduct all home expenses for a home-based business 

Reality:

You can only claim the portion of your home used exclusively for business calculated based on square footage. Personal areas or dual-purpose spaces are exempt. 

Myth:

Your business made very little (or even lost) money so you don’t need to do taxes this year.  

Reality: 

All businesses have some bad years and you still must file your taxes. In fact, you may be able to deduct losses from other income sources and thus reduce your tax burden.  

Myth:

Because you are small self-employed business it’s unlikely the CRA will ever look closely at your tax return and expense deductions. 

Reality:

The CRA will indeed take the time to audit a self-employed small business, especially those that claim deductions in areas that are frequently abused, such as travel, meals, entertainment and vehicle expenses. 

To properly file your taxes in Canada you’ll need to pay attention to deadlines, keep meticulous records and ensure you don’t claim any personal or ineligible expenses. For self-employed Canadians, the filing deadline is June 15, but it’s advisable to pay any taxes owed by April 30 to avoid interest charges. Your GST/HST return is also due by April 30, 2025. 

Read more: Important dates for small business owners in Canada for 2025