Welcome back to The Bright Side. In this month's blog, we’re diving into what you can write off as a business expense and what the CRA (Canada Revenue Agency) is watching for in 2025.
Running a business in Canada comes with plenty of perks — including the ability to deduct legitimate business expenses. But knowing what qualifies (and what doesn’t) isn’t always as clear-cut as it seems. As an accountant, I often get asked things like:
"Can I write off my home internet?"
"What about meals with clients — is that 100% deductible?"
"I bought a new laptop — is that a business expense or a capital asset?"
These questions matter, especially as the CRA ramps up reviews on small business filings heading into 2025.
Let’s break down what you can and can’t deduct, some common mistakes to avoid, and what to know to stay audit-ready this year.
What you can write off as a business expense
To be deductible, an expense must be incurred to earn business income — this is CRA’s golden rule. Here are some common write-offs that qualify:
Office supplies & software — Pens, printer ink, accounting software (like QuickBooks or Xero), Microsoft 365 subscriptions — all deductible.
Professional fees — Accounting, legal, or consulting services related to your business are 100% deductible.
Meals & entertainment (50%) — Client meals? Partially deductible — but only 50% of the cost. Must be for legitimate business purposes (no dinner dates or birthday parties!).
Home office expenses — If you work from home, you can deduct a portion of utilities, internet, property taxes, mortgage interest (not the principal), and repairs. The amount is based on square footage or use-of-space.
Vehicle expenses — If you use your vehicle for business (not just commuting), you can claim fuel, insurance, maintenance, and lease payments — but you must track business vs personal use with a logbook.
Salaries & wages — Payments to employees (including yourself if incorporated) are deductible, as are CPP and EI contributions.
What you can’t deduct (even if it feels business-related)
Some things feel like fair game — but CRA says otherwise:
Clothing — Unless it's a branded uniform or protective gear, regular clothes (even for meetings) aren't deductible.
Personal grooming — Haircuts before a presentation? Still personal.
Client gifts over $500 or that include alcohol — Partial deduction rules may apply, and CRA has limits.
Club memberships — Golf clubs, gyms, or social memberships are not deductible even if used for networking.
Common mistakes that raise red flags
Want to avoid a CRA audit? Watch out for these missteps:
Claiming 100% of meals or vehicle expenses without support
Large spikes in expenses year-over-year with no clear reason
Writing off personal items like vacations or furniture without business justification
Failing to keep receipts or proof of business purpose
Mixing personal and business accounts — this can muddy the waters if reviewed
What the CRA is watching for in 2025
The CRA has been increasing its scrutiny on:
Gig economy workers and side hustles
Home office and vehicle claims — especially since hybrid work became more common
“Aggressive” write-offs that look more personal than business-related
Digital transactions and e-commerce sellers — think Etsy, Shopify, Amazon, or influencers
If your business fits any of these, extra documentation and clear recordkeeping are critical.
How to stay audit-ready
Here’s how you can stay ahead of the curve — and stress-free at tax time:
Keep digital or physical copies of all receipts
Use accounting software to categorize and track expenses properly
Maintain a logbook for mileage claims
If unsure, ask your accountant before claiming anything “borderline”
Don’t wait until year-end — review your expenses monthly
Understanding your write-offs isn’t just about taxes — it’s about owning your power as a business owner. Making strategic decisions. Avoiding burnout. Keeping more of what you earn. Let’s make 2025 your most empowered year yet.
The opinions shared in this blog are intended for informational purposes. This blog does not provide official advice, and any actions taken based on its content are at one's own discretion. It is recommended to consult your trusted advisor to address your specific circumstances.
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