Which Business Expenses Can I Actually Deduct?

Few questions arrive at an accountant's desk more often than 'can I write this off?' The Income Tax Act's answer is a principle, not a list: an expense is deductible when it is reasonable in the circumstances and incurred for the purpose of earning income from the business.

That principle is generous — and policed at its edges. Personal living costs never qualify, mixed-use costs must be apportioned honestly, and every deduction ultimately rests on one unglamorous foundation: documentation.

The everyday categories are settled ground: advertising, professional fees, office supplies, software, insurance, rent, salaries, interest on business borrowing, bank charges, and the business share of vehicle costs supported by a kilometre log. Meals and entertainment are the famous half-measure — generally 50% deductible even when the purpose is clearly business. Capital purchases (equipment, computers, vehicles) are not expensed but deducted over time through capital cost allowance at prescribed rates.

The home office deserves its own care: the workspace must be either your principal place of business or used exclusively for business and regularly for meeting clients, and the deduction is the business-use share of rent or home costs (mortgage interest, utilities, property tax for the self-employed) — never creating a loss on its own. The traps are equally well-marked: everyday clothing is personal even if worn for work, commuting is personal, life insurance premiums are generally not deductible, and 'reasonable' means CRA can challenge amounts out of proportion to the income earned. When in doubt, the test is simple: would you have spent this if the business did not exist?