What are CRA business expenses?

The Canada Revenue Agency (CRA) allows businesses to deduct certain expenses for tax purposes. To deduct business expenses in Canada, your company must have a reasonable expectation of income and profit. This means that while you can continue to deduct the costs of doing business over your company’s lifetime, you cannot deduct expenses indefinitely for a continued loss.

Many reasonable costs incurred to make income may be eligible to be written off as a business expense. It is important to note that the CRA’s definition of reasonable varies from business to business. Be sure to check with the CRA or your accountant to determine if an expense is permissible.

Any personal, living, or non-business-related expenses are not valid. Therefore, it is helpful to keep your business finances separate from your personal finances.

List of common CRA business expenses

Reasonable CRA business expenses can vary from industry to industry. What may be suitable for one type of business may not be valid for another. Below is a list of common CRA business expenses:

• Accounting and bookkeeping
• Advertising and promotion to produce income
• Bad debts and collection company fees
• Bank fees, such as credit card processing and chequing account fees
• Business software and applications
• Business start-up costs
• Business taxes, dues, fees, and licenses
• Capital cost allowance, such as depreciation on capital assets in your company
• Insurance costs, such as building, vehicle, and liability insurance coverage
• Interest fees, such as the interest paid on money borrowed to start your business
• Legal fees, such as legal counsel and incorporation costs
• Maintenance and repair, such as building, vehicle, and equipment repairs
• Management and consultation fees
• Meals and entertainment
• Motor vehicle expenses
• Office expenses and supplies
• Professional and membership dues
• Property taxes
• Rent or lease expenses
• Shipping, freight, postage, and delivery charges
• Tax credits that your business may qualify for
• Tax deductions for payroll employees, such as Canada Pension Plan or Quebec Pension Plan premiums, Employment Insurance premiums, and Workers Compensation premiums
• Telephone and telecommunication expenses, including internet service provider fees
• Travel expenses, such as convention or conference attendance
• Wages, salaries, and employer-paid benefits, such as private health care plan premiums

FAQ’s about CRA business expenses in Canada

Do you need receipts for business expenses?

In Canada, to claim business expenses, receipts are required and must be kept on file for six years. Although you do not submit your receipts with your tax return, the Canada Revenue Agency can request that you provide them for review at any time, and they will be required during an audit.

How do you write off business expenses in Canada?

Once you are confident that the business expenses are valid and reasonable, you can write off the expenses when filing your end of year business taxes. There are several options for filing:

Hire an Accountant

You can hire an accountant to complete your business taxes, which is a business expense that you can often write off. An accountant will gather all necessary information from you, including all details regarding the income made during the year and all expenses. An accountant will often ask to see all receipts or proof of expenses, such as cancelled cheques and bank statements. They will then prepare your business taxes and submit them to the CRA on your behalf.

Use tax software

You can purchase one of many available software programs to file your business taxes. These software programs, which are updated every year to reflect the newest regulations, walk you step-by-step through the process of declaring income and expenses. Once all steps are completed, the software connects to the CRA and files your tax return.

Manually complete your taxes

You can complete your taxes manually. On the CRA website, you can download paper copies of all forms required. You complete the necessary documents and mail in the package to the CRA.

Can I claim my cell phone as a business expense in Canada?

Most often, cell phone expenses cannot be used as a business expense in Canada. However, there are a few cases where it is allowable.

If cell phone usage is required for a commission-based employee to do their job, you may be able to write off a portion. A portion of the leasing cost and the air time related to earning an income can be used as an expense. Please note that the setup and connection fees are not valid. In addition, if you buy a cell phone instead of leasing, the cost is not a valid expense.

If you are a small home-based business that operates most of the time out of a dedicated home office, you may also be able to expense your cell phone usage. You can claim a portion of your cell phone service plan if the plan’s cost is reasonable, the usage was for employment purposes, and the cost has been divided between personal and business use.