This is a reference guide for Canadian small businesses filing their T2 (corporation) or T1 (self-employed) business income. The categories below align with how CRA categorises deductible business expenses, with GST/HST (ITC) treatment noted for each.
Sort every business receipt into one of the categories below before you file. The GST/HST note under each category tells you whether you can claim an Input Tax Credit (ITC) on the tax you paid. The income deduction and the ITC are two separate claims: an expense can be deductible and carry no ITC, or the reverse. When a rule depends on your situation, confirm it with your accountant or the CRA publications listed at the bottom of this page.
Yes. Advertising and marketing costs are deductible.
This includes online advertising (Google Ads, Meta Ads), print advertising, website costs, marketing agency fees, sponsorships, and promotional materials.
ITC: Fully eligible. Claim HST paid on all advertising costs. CRA note: Yellow Pages-style directory fees and business card printing are included. Costs to run a personal social media profile are not eligible unless clearly for business purposes.
Only 50% of eligible meal and entertainment expenses is deductible. This covers client dinners, team meals, sports events for client entertainment, and similar expenses.
CRA rule: Only 50% of eligible meal and entertainment expenses are deductible. Keep a record of who attended and the business purpose. ITC: You can claim ITCs on 100% of the HST paid, but your income deduction is limited to 50%.
Accountant fees, lawyer fees, consulting fees, bookkeeping, and other professional services.
ITC: Fully eligible if the service provider is registered for GST/HST and includes their registration number on the invoice. CRA note: Legal fees related to personal matters are not eligible even if paid from a business account.
Printer paper, pens, postage, courier fees, office furniture (under $500 per item), software subscriptions.
ITC: Fully eligible. CRA note: Small equipment under your CRA threshold may be fully expensed in the year; above the threshold, items become capital assets subject to CCA.
Fuel, insurance, repairs, parking, vehicle registration, leasing costs, and car washes.
ITC: Eligible on the business-use portion only. You must maintain a mileage log to establish the business-use percentage. CRA note: Without a mileage log, CRA can disallow all vehicle expense claims. The log must show date, destination, purpose, and distance for each business trip.
You can claim hotels, flights, car rentals, meals while travelling for business, and local transit costs.
ITC: Eligible when you paid GST/HST and hold the receipt. CRA note: Meals during business travel fall under the same 50% limit as other meals. Record the dates, destination, and business purpose of each trip so the expense can be tied to your business.
Yes, if the space is your principal place of business or you use it exclusively and regularly to meet clients. Eligible expenses include a proportional share of rent, mortgage interest, utilities, internet, and home insurance.
ITC: Eligible on the business-use portion (calculated as a percentage of home square footage used exclusively for business). CRA note: The home office must be your principal place of business, or a space used exclusively and regularly for meeting clients.
Yes. Amounts paid to employees (salaries, bonuses, overtime) and to independent contractors are deductible business expenses.
ITC: There is no GST/HST on wages, so there is no ITC to claim on them. For contractors, you can claim an ITC only if the contractor is registered for GST/HST and charged you tax. Keep each invoice with the contractor's registration number. CRA note: Some contractor payments must be reported on a T4A slip, so check the CRA guidance for your situation.
Yes. Business bank account fees, credit card annual fees on a business card, and interest on business loans or lines of credit are deductible.
ITC: Most banking and interest charges are exempt financial services, so they generally carry no GST/HST and there is no ITC to claim.
Premiums for business liability insurance, commercial property insurance, and professional liability (E&O) coverage are deductible.
ITC: Insurance premiums generally carry no GST/HST, so there is usually no ITC. Some provinces charge a separate provincial tax on premiums, and that tax is not claimable as an ITC. CRA note: Life insurance premiums are generally not deductible unless the policy is required as collateral for a business loan. Confirm with your accountant before claiming them.
Yes. SaaS subscriptions, cloud storage, phone plans (business portion), and software licences are deductible business expenses.
ITC: Eligible when the vendor charges GST/HST and you have the invoice. Some foreign vendors do not charge Canadian tax, in which case there is nothing to claim. CRA note: Computer equipment is usually a capital purchase claimed through capital cost allowance (CCA), not expensed in full.
Keep the original receipt or invoice for every expense, along with a note of the business purpose for meals, travel, and vehicle use. CRA expects you to keep these records for six years from the end of the tax year they relate to. The guide on how long to keep business receipts covers the exceptions, and what receipts CRA requires explains what a valid receipt must show.
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Start Free Trial →The rules on this page come from these Canada Revenue Agency publications. Check them for the current wording, because CRA updates its guidance.