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- Clothing Purchases. You want to look your best while running your business, especially when you have to meet with clients or customers. That means investing in clothing, makeup, and grooming, though you can’t claim these costs as independent contractor business expenses.
- Workday Snacks. If you buy snacks to eat while you you work, you can’t deduct them. The CRA does make an exception for self-employed bicycle couriers and rickshaw drivers, though.
- Dining Out. When you work from home as an independent contractor, you might want to get out for a change of scenery sometimes. Keep in mind that if you work from a coffee shop for the day, you can’t claim the coffee and pastries you consume as business expenses.
- Personal Expenses. You can’t write off personal costs as independent contractor business expenses on your tax return. If you buy paper and pencils for your children to use, you can’t write off those costs as office expenses.
- Overview
- Advertising
- Allowance on eligible capital property
- Bad debts
- Business start-up costs
- Business tax, fees, licences and dues
- Delivery, freight and express
- Fuel costs (except for motor vehicles)
- Insurance
- Interest and bank charges
This page discusses the more common expenses you might incur to earn income from your activities. Incur means you paid or will pay the expense.
The amount you can deduct in a given year for any expense depends if it is considered a current year expense or capital expense. For more information, go to Current or capital expenses and Basic information about capital cost allowance (CCA).
You cannot claim expenses you incur to buy capital property. However, as a rule, you can deduct any reasonable current expense you incur to earn income. The deductible expenses include any GST/HST you incur on these expenses minus the amount of any input tax credit claimed.
Also, since you cannot deduct personal expenses, enter only the business part of expenses on Form T2125, T2042 or T2121.
•advertising
•allowance on eligible capital property
You can deduct expenses for advertising, including advertising in Canadian newspapers and on Canadian television and radio stations. You can also include any amount you paid as a finder's fee.
To claim the expenses, you must meet certain Canadian content or Canadian ownership requirements. These requirements do not apply if you advertise on foreign websites.
Restrictions apply to the amount of the expense you can deduct for advertising in a periodical:
•You can deduct all the expense if your advertising is directed at a Canadian market and the original editorial content in the issue is 80% or more of the issue's total non-advertising content.
•You can deduct 50% of the expense if your advertising in a periodical is directed at a Canadian market and the original editorial content in the issue is less than 80% of the issue's total non-advertising content.
You cannot deduct expenses for advertising directed mainly at a Canadian market when you advertise with a foreign broadcaster.
Note
As of January 1, 2017, the eligible capital property (ECP) system was replaced with the new capital cost allowance (CCA) Class 14.1 with transitional rules. For more information, go to Class 14.1 (5%).
You can generally deduct an amount for a bad debt if:
•you had determined that an account receivable is a bad debt in the year
To deduct a business expense, you need to have carried on the business in the fiscal period in which the expense was incurred. You have to be clear about the date your business started.
Where a taxpayer proposes to undertake a business and makes some initial expenditures with that purpose in mind, it is necessary to establish whether the expenditure preceded the start of the business or whether the business had in fact begun and there were expenses incurred during preliminary steps leading to the start of normal operations.
Consequently, the date when the business can be said to have commenced must be known.
Determining what you can claim as a start-up expense can be difficult. For more information, go to Interpretation Bulletin IT-364, Commencement of Business Operations, or see Guide RC4022, General Information for GST/HST Registrants.
You can deduct any annual licence fees and some business taxes you incur to run your business.
You can also deduct annual dues or fees to keep your membership in a trade or commercial association, as well as subscriptions to publications.
You can deduct the cost of delivery, freight and express incurred in the year that relates to your business.
You can deduct the cost of fuel (including gasoline, diesel and propane), motor oil and lubricants used in your business.
For information about claiming the fuel used in your motor vehicle, go to Motor vehicle expenses.
You can deduct all ordinary commercial insurance premiums you incur on any buildings, machinery and equipment you use in your business.
The insurance costs related to your motor vehicle have to be claimed as motor vehicle expenses.
The insurance costs related to business use of workspace in your home have to be claimed as business-use-of-home expenses.
In most cases, you cannot deduct your life insurance premiums. However, if you use your life insurance policy as collateral for a loan related to your business, including a fishing business, you may be able to deduct a limited part of the premiums you paid. For more information, go to Interpretation Bulletin IT-309, Premiums on Life Insurance Used as Collateral.
You can deduct interest incurred on money borrowed for business purposes or to acquire property for business purposes. However, there are limits on:
•the interest you can deduct on money you borrow to buy a passenger vehicle or a zero-emission passenger vehicle. For more information, go to Motor vehicle expenses.
•the amount of interest you can deduct for vacant land. Usually, you can only deduct interest up to the amount of income from the land that remains after you deduct all other expenses. You cannot use any remaining amounts of interest to create or increase a loss, and you cannot deduct them from other sources of income.
•the interest you paid on any real estate mortgage you had to earn fishing income. You can deduct the interest, but you cannot deduct the principal part of loan or mortgage payments. Do not deduct interest on money you borrowed for personal purposes or to pay overdue income taxes.
Apr 18, 2024 · But property tax related to a workspace used for business purposes in your home must be claimed as a “business-use-of-home” expense. What are non-tax-deductible expenses? Unfortunately, even though some of these expenses seem legitimate, they are not tax deductible for your small business: Clothing.
Dec 11, 2016 · You can deduct your technology expenses in two ways: as a current expense or as a capital expenditure. Current expenses are costs you pay for immediate use, like internet service or in-app purchases. The CRA allows you to deduct the full cost of these items in the year of purchase.
Dec 7, 2023 · The Canada Revenue Agency (CRA) allows businesses to deduct business expenses when they incur to earn income. But before you reduce your tax obligation, it’s important to understand what qualifies as a deductible business expense and how to record and claim business expenses in Canada.
The general rule is that you cannot deduct outlays or expenses that aren't related to earning business income. The following may be considered when determining operating expenses: Prepaid expenses; Accounting and legal fees; Advertising expenses; Business tax, fees, licenses and dues; Insurance expenses; Interest and bank charges; Maintenance ...
People also ask
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Jan 17, 2018 · You can deduct the following expenses from your taxable income. Note that these should be proportionate to the usage of livable space that you use for business. For example, if you use 20% of your house for an office, then you can deduct 20% of expenses.
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