Every deduction Canadian small businesses miss
The dozen deductions every founder should know about, ranked by how often we see them missed.
Published January 15, 2025 · 8 min read
Most Canadian businesses leave money on the table not because the rules are unfair, but because the deductions are scattered across forms with serial numbers no one remembers. Here are the ones we see missed most often, ranked roughly by frequency of being overlooked.
Home office expenses
If you use part of your home exclusively for business, you can deduct a proportional share of rent, mortgage interest, utilities, insurance, and maintenance. The math is straightforward: measure your workspace, divide by total home square footage, apply that percentage to your home expenses.
Most people give up because they think the documentation is too much work. It is not. A floor plan and a year of utility bills is plenty. For a typical 200 square foot home office in a 1,000 square foot apartment, you are looking at thousands of dollars per year in deductions you are otherwise leaving behind.
Vehicle expenses
Fuel, insurance, repairs, lease payments, and depreciation are all deductible based on the business-use percentage of your vehicle. The CRA requires a mileage log, and most people are bad at keeping one. The fix is to use a phone app that tracks automatically.
Be honest about business use. If you commute to a single office, that does not count. But trips to client meetings, supplier visits, conferences, and equipment runs do. For a typical solo operator running a side business, this is often 30 to 50 percent of total kilometres.
Capital cost allowance with the accelerated investment incentive
When you buy equipment for your business, you do not deduct the full cost in year one. You deduct it over multiple years based on the asset's class. The Accelerated Investment Incentive (AII) lets you claim 1.5x the normal rate in year one, which dramatically improves cash flow.
Zero-emission vehicles get the most generous treatment: a full 100 percent deduction in year one, up to a cost cap. If you are planning a vehicle purchase, this is worth structuring around.
Meals and entertainment
Half of business meals are deductible. Client lunches, team dinners, conference meals. The receipt rules are strict: write the date, the business purpose, and who was there on the back. A credit card statement alone is not enough.
For most businesses, this is a few thousand dollars a year. Worth tracking, but do not break your back over it.
Professional fees
Your accountant, lawyer, consultant, and bookkeeper fees are 100 percent deductible when they relate to the business. So are your tax software costs, your incorporation legal bill, and your annual minute book maintenance.
If you paid Deductly money for something (we are free, but pretend), that would be deductible too.
Bad debt
If a client never paid you and you have stopped trying to collect, you can write the receivable off as bad debt. This reduces your taxable income in the year you give up on collection.
The key is documentation. You need evidence you tried to collect, and a clear decision point. A signed memo to your file stating 'as of December 15, this $4,200 receivable from Customer X is deemed uncollectible' is enough.
Most deductions are not exotic. They are normal business expenses that founders never think to categorize properly. The fix is a 30-minute conversation with your accountant in November, before year-end planning. Take the Deductly quiz first so you walk in with a checklist.