Guide to CRA-Approved Tax Deductions in Canada

Tax season has arrived once again, meaning it’s time to gather up your receipts and whip your annual numbers into shape. While some approach this time of year with trepidation, it’s really nothing to worry about – if you’re completely honest in what you declare.

The good news is that most entrepreneurs and small business owners can make use of a variety of tax deductions that will bring down the amount they owe. Broadly speaking, anything that constitutes a reasonable small business expense incurred to generate business revenue can be considered tax deductible. Receipts are useful to back up these expenses and will prove necessary if you’re identified for an audit. Here are some of the most common CRA-approved tax deductions entrepreneurs claim.

Home Office Expenses

A lot of entrepreneurs conduct business at home. The good news is the Canada Revenue Agency allows you to deduct expenses relating to your home – if you meet one of the following two conditions:

  • You use your home more than 50% of the time when you work
  • Your home is exclusively used to conduct work and you regularly hold meetings there

Now this doesn’t mean you can write off the entirety of your mortgage or rent. Instead, you’ll need to establish the square footage of your home workspace and work out the percentage of the total square footage of your home. For example, if your home is 1000 sq. ft. and your office is 250 sq. ft. you’ll be able to deduct 25 per cent of your home related expenses from your small business income. This encompasses a swathe of household expenses including:

  • Mortgage/Rent
  • Property Taxes
  • Home/Condo Insurance
  • Strata/Maintenance fees

It’s important to note you can’t deduct home expenses if you are simultaneously renting an office space, even if you’re still conducting some business from home.

Vehicle Expenses

Vehicle expenses are one of the most common business expenses claimed by entrepreneurs. After all, it’s extremely likely you use your car for business. In a previous blog, Gabrielle Loren, founding partner of Loren Nancke Chartered Professional Accountants, explained the importance of tracking your business mileage. The CRA allows business owners to claim a reasonable portion of their vehicle expenses back as a tax deduction.

This can be applied to most expenses relating to a vehicle:

  • Fuel
  • Repairs/Upkeep
  • Insurance
  • License and Registration
  • Depreciation
  • Toll charges

An average business tends to write off 50 per cent of vehicle expenses so there’s plenty of flexibility depending on your circumstances. Make sure to keep as many receipts as you can to back up any expenses you claim.

Personal Expenses

No matter what industry you’re in, there are personal expenses you will accrue during your business dealings that will be deductible. Here are some of the most common:

  • Home Phone Bill
  • Home Internet Bill
  • Cell Phone Bill
  • Supplies
  • Software Licenses
  • Small Tools
  • Travel
  • Meals and Entertainment

The important point to note is that you can only claim for the above if they were directly relating to your business. You also need to be able to prove this fact.

Find Out More

Need some clarity on your small business tax situation? Why not talk to an accountant? This 30-minute one-on-one consultation can help you cut through the noise and discover what expenses can be deducted.