What are CRA business expenses?
The Canada Revenue Agency (CRA) allows businesses to deduct certain expenses for tax purposes. The amount you can deduct in a year depends on whether the expense is considered a current-year expense or a capital expense.
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 whether an expense is permissible.
Personal expenses are not valid. Therefore, it may be 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 other professional fees
- Advertising
- Bad debts
- Bank charges and interest
- Business start-up costs
- Business taxes, dues, fees, and licenses
- Capital cost allowance, such as depreciation of a building, furniture, or equipment
- Delivery, freight, and express charges
- Insurance costs, such as premiums on buildings, machinery, and equipment
- Interest fees, such as the interest paid on money borrowed for your business
- Legal fees
- Maintenance and repairs
- Management and administration fees
- Meals and entertainment
- Membership dues in a trade or commercial association
- Motor vehicle expenses
- Office expenses
- Property taxes
- Rent
- Salaries, wages, and benefits
- Telephone and utilities
- Travel expenses incurred to earn business and professional income, such as public transportation, hotel accommodation, meals
FAQs 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 may write off the expenses when filing your end-of-year business taxes. Here are some of the options you could choose for filing:
Hire an accountant
You could hire an accountant to complete your business taxes, which is a business expense that you can often write off. An accountant typically gathers all necessary information from you, including all details regarding the income made during the year and all expenses. They will often ask to see all receipts or proof of expenses. They will then prepare your business taxes and submit them to the CRA on your behalf.
Use tax software
You could 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 could also decide to complete your taxes manually. On the CRA website, you could download paper copies of the forms once you know which ones you need. You could then complete the necessary documents and mail 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 you lease a cell phone for a commission-based income, you may be able to write off a portion of it. A portion of the air time related to earning an income can be claimed as an expense. Please note that the licensing and connection fees cannot be deducted. In addition, if you buy a cell phone instead of leasing one, 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 some of your cell phone usage as a business-use-of-home expense.
