A question we receive frequently from clients is, “Is this a write-off?” Running a business means juggling receipts and wondering which ones lower your tax bill. Use this three-tier guide to sort your expenses with confidence—and avoid ugly surprises at CRA audit time.
1. Green-Light Expenses: Clearly Deductible
These costs directly support day-to-day operations, so the CRA generally allows a full write-off:
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Office essentials – pens, paper, postage, printer ink, software subscriptions, and cloud storage.
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Advertising & marketing – Google Ads, social media boosts, printed flyers, website hosting.
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Professional services – fees paid to lawyers, accountants, and bookkeepers (yes, even this conversation!).
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Employee pay & benefits – salaries, CPP/EI remittances, group health plans.
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Commercial rent & utilities – office or shop lease, heat, hydro, internet, security monitoring.
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Business insurance premiums – general liability, errors & omissions, cyber coverage.
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Vehicle costs (business portion) – fuel, repairs, lease, or capital cost allowance when you keep a mileage log.
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Training directly tied to the job – industry conferences, software courses, safety certifications.
Key takeaway: When the expense is ordinary, necessary, and incurred solely to earn business income, you’re on solid ground.
2. Grey-Area Expenses: Case-by-Case Deductions
These items can be deductible, but only if you meet CRA conditions and document them carefully:
| Expense | What the CRA Looks For | Your Action Step |
|---|---|---|
| Home-office costs | Work space must be your principal place of business or used exclusively to earn income and meet clients. | Track square footage, keep utility bills, and claim only the business percentage. |
| Meals & entertainment | Must be for earning income; only 50 % is deductible. | Note who attended, the business purpose, and keep detailed receipts (no Visa slips). |
| Travel | Trip must be primarily business-related. | Save agendas, boarding passes, and separate any personal side trips. |
| Cell phone & internet | Split between business and personal use. | Log usage or apply a reasonable percentage. |
| Branded clothing or safety gear | Uniform, protective wear, or apparel displaying company logo. | Keep purchase records and avoid fashion items you’d wear off-duty. |
| Gifts | Limited to $500 per employee per year for non-cash gifts; client gifts must be reasonable and documented. | Record the recipient, occasion, and business reason. |
3. Red-Light Expenses: Not Deductible (Nice Try, Though)
These costs feel “business-adjacent,” but the CRA treats them as personal:
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Everyday wardrobe updates – suits, shoes, haircuts, manicures.
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Gym memberships and spa treatments – unless you operate the facility.
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Family vacations “with a little networking” – personal portion is never deductible.
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Fines and penalties – parking tickets, speeding infractions, late-filing charges.
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Basic life insurance premiums – only deductible when required as collateral for a business loan (rare).
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Lavish client entertainment – private yacht charters or luxury boxes usually fail the “reasonable” test.
Trying to slip these through risks disallowed deductions, interest, and penalties.
Final Word
Before you toss a receipt into the “write-off” pile, ask:
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Does this expense directly earn or support business income?
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Can I prove the business purpose with clear records?
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Would it pass the “new CRA auditor” test without a long explanation?
When in doubt, reach out. Compass CPA is here to review your specific situation and keep your deductions bullet-proof—so you can focus on growing the business, not fighting tax headaches.
