The Top 7 Tax Deductions

As a small business owner in Canada, every dollar counts. Maximizing your tax deductions isn’t just smart—it’s essential. The Canada Revenue Agency (CRA) allows for many legitimate business expenses to be deducted from your income, reducing your tax burden. But which ones are the most valuable or commonly missed?

Here are 7 tax deductions every Canadian entrepreneur should know about—and use.

  1. Home Office Expenses

If you operate your business from home—even part-time—you may be eligible to deduct a portion of your home expenses. This includes:

  • Rent or mortgage interest
  • Utilities (heat, electricity, water)
  • Property taxes
  • Internet and phone

To claim, you must calculate the percentage of your home used for business. For example, if your office takes up 10% of your home’s square footage, you can claim 10% of eligible home expenses.

Tip: Keep good records and take photos of your workspace in case the CRA requests evidence.

  1. Vehicle Expenses

Use your vehicle for business? You may deduct:

  • Gas
  • Insurance
  • Repairs and maintenance
  • Lease payments or capital cost allowance (for owned vehicles)
  • Parking fees

The CRA requires a logbook to track business use vs. personal use. Apps like Driversnote or MileIQ can simplify this.

Tip: If your car is used for both personal and business reasons, only the business-use portion is deductible.

Pro Tip for Corporations that use their personal vehicles: If tracking the above is to cumbersome, you could consider using your logbook only to track mileage and reimbursing the per km rate allowable by CRA (changes yearly).

  1. Meals and Entertainment

While only 50% of eligible meals and entertainment expenses are deductible, they can add up over time.

Examples include:

  • Taking a client to lunch
  • Attending a networking event with food
  • Staff parties or holiday dinners

Tip: Note the purpose of the meeting and who attended on the receipt to substantiate the claim.

Pro Tip: Up to 6 all-staff meals per year can be deducted at 100%. This would include your holiday gatherings. To ensure these are caught, we recommend they be coded to a different account in your bookkeeping.

  1. Salaries and Contractor Payments

If you employ staff or subcontract work, wages and fees are tax deductions. Be sure to:

  • Issue T4s for employees and T4As for contractors as applicable
  • Remit payroll deductions correctly and pay on time

Bonus: You can also deduct employer contributions to CPP, EI, and group benefit plans.

Pro tip: Watch for life insurance and any disability amount add-backs as those must be paid by your employee or taxed as a taxable benefit.

  1. Professional Services and Accounting Fees

Did you hire a lawyer to review your contracts? An accountant to prepare your year-end financials? These are fully deductible.

Even fees paid for tax advice or CRA representation are deductible.

  1. Advertising and Marketing

This includes:

  • Social media ads
  • Google or Facebook ads
  • Website costs (hosting, design, domain fees)
  • Business cards and promotional materials

Pro Tip: Clothing in general is not deductible unless it is for safety purposes. However, T-shirts with your logo can be deducted and handed out to potential customers or worn by your staff to promote your company.

  1. Capital Assets (Depreciation/ Capital Cost Allowance – CCA)

Larger purchases such as computers, furniture, and machinery are not expensed immediately. Instead, they are depreciated over time using Capital Cost Allowance (CCA).

Tip: There are different CCA classes with varying rates. A qualified accountant can help you apply these correctly and optimize deductions across multiple years.

Final Thoughts: Don’t Leave Money on the Table – Get all your Tax Deductions

Tax deductions can significantly lower your tax bill—but only if you know what you’re entitled to. Keeping detailed records, saving receipts, and working with a professional can ensure you’re not missing valuable opportunities. Want more – check our CRA’s list here.

You can also check out our website for more great blog content or contact us using our contact us page. Virtual Heights Accounting is a CPA firm that provides bookkeeping, tax, year end and payroll services to small businesses in Canada. This blog is not exhaustive and is intended for informational purposes only. Please talk directly to a professional for more insights on your own possible deductions.