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Most small business write-offs come down to one test: was the expense reasonable and spent to earn income? If yes, you deduct it. On $20,000 of ordinary expenses, an Ontario sole proprietor with $100,000 of sales would pay roughly $6,200 less income tax and CPP, going by the figures our self-employed tax calculator uses for 2026.
What can a small business actually write off?
The CRA says you can deduct any reasonable current expense you incur to earn income. Rent for a shop, software subscriptions, advertising, office supplies, professional fees, insurance and the phone bill for your business line all fit. So does the wage you pay an employee.
Personal costs don’t. If something serves both sides of your life, like a mobile plan, you deduct only the business share. Pick a fair split, write down how you got it, and keep using the same one.
Then there’s the split between current and capital spending. A box of printer paper is current, so you deduct it all in the year you buy it. A laptop, a delivery van or a piece of shop equipment is capital. You can’t deduct the price in one go. You claim capital cost allowance, which spreads the write-off over time under the CRA’s classes.
Which write-offs have limits?
Some claims come with a cap or a condition. This table covers the ones people trip over most.
| Expense | What the CRA allows |
|---|---|
| Meals and entertainment | 50% of the amount, or a reasonable amount if that’s lower |
| Meals while travelling or at a convention | Same 50% limit |
| Business use of home | A reasonable share, such as workspace area divided by total home area |
| Home expenses overall | Can’t be more than net business income before those expenses, so they can’t create a loss |
| Equipment, vehicles, buildings | Capital cost allowance, not a full deduction in year one |
| GST/HST you paid, if registered | Claimed back as input tax credits, so the expense is reduced by the credit |
How does a home office claim work?
You need one of two things. Either your home workspace is your principal place of business, or you use it only to earn business income and meet clients there regularly. A corner of the couch with a laptop doesn’t help you much.
Then you claim a share of heat, electricity, insurance, cleaning materials, property tax and mortgage interest. Rent works too if you rent. Unused amounts can be carried forward if you still qualify next year.
Here’s a quick feel for the share. If your home is 1,000 square feet and the room you work in is 100, your reasonable share is 10%. On $4,000 a year of eligible home costs, that’s $400 to claim. Small, but it’s real money back, and it’s only yours if the room meets the test above.
One warning. Claiming capital cost allowance on the home itself can bring capital gain and recapture problems when you sell. Most small operators leave that one alone.
What does a write-off save you?
Run the numbers on a real case. An Ontario sole proprietor has $100,000 of sales and $20,000 of allowable expenses. Net income is $80,000.
| Net income $100,000 | Net income $80,000 | |
|---|---|---|
| Income tax (federal and Ontario) | $19,045 | $13,234 |
| CPP, both halves | $9,293 | $8,893 |
| Total | $28,338 | $22,126 |
The $20,000 of expenses saves $6,212, give or take a dollar of rounding in the calculator. That’s about 31 cents per dollar at this income, not the full dollar. A write-off makes an expense cheaper. It doesn’t make it free, so don’t buy something just for the deduction. A $1,000 gadget that you don’t need still costs you about $690 after tax.
Two limits on that estimate. The calculator leaves out GST/HST and EI, and it only takes net income after expenses, so add the expense step yourself. The dollar figures move with your province and your other income.
If the bill looks large, check whether instalments apply. The tax instalment calculator uses a $3,000 threshold for net tax owing. And if you sell goods, the profit margin calculator shows how much of each sale is left after costs.
Where do people get write-offs wrong?
The common mistake is a claim with no paper behind it. The CRA expects records for every transaction, and its page on how long to keep records says you generally keep them for six years from the end of the last tax year they relate to. A bank statement alone rarely proves what you bought, so keep the receipt or invoice too.
The next is deducting the whole cost of a capital item. The third is mixing personal and business spending in one account, which makes every claim harder to defend. A separate business account costs a few bucks a month and saves hours at tax time.
Then there’s the GST/HST double count. If you claim an input tax credit, you take that tax out of the expense. Our GST/HST calculator splits a bill into price and tax. In Ontario a $100 purchase carries $13 of HST, so a registrant deducts $100 and claims the $13 as a credit.
We haven’t covered every industry rule. Motor vehicle limits, employee benefits and payments to family members each have their own conditions on the CRA pages, so read those before you claim them. Bookkeeping makes all of this easier, and our guide on whether bookkeeping is mandatory covers the record side.
What if you’re not sure an expense qualifies?
Ask the simple question first: would you have spent this money if the business didn’t exist? If the answer is no, you’re probably fine. If it’s a maybe, claim only the business part and keep a note of your reasoning. Still stuck? The CRA’s pages for your situation are the place to settle it.
Our sources
The rules above come from the Canada Revenue Agency‘s pages on business expenses, meals and entertainment, business use of home and record keeping. Dollar examples come from the 2026 tax data behind our calculators. This is an independent guide, separate from any government body. Confirm anything you’re about to claim on the CRA page for your situation.
Frequently asked questions
Can I write off my whole phone bill?
Only the business share. If you use the phone for both work and personal life, pick a fair split and keep a note of how you worked it out.
How much of a business meal can I deduct?
The CRA limits food, drink and entertainment to 50% of the amount, or a reasonable amount if that is lower.
Can a home office create a business loss?
No. Home expenses can't be more than your net business income before you deduct them. Unused amounts can be carried forward if you still qualify.
Is buying equipment a full write-off?
Not in one go. Capital items like computers and vehicles are claimed through capital cost allowance over time.
How long do I keep receipts?
The CRA generally asks for six years from the end of the last tax year the records relate to.
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST