Top Tax Write-Offs for Canadian Small Businesses in 2025 (And What to Avoid)

As a Canadian entrepreneur, knowing what you can and can’t deduct at tax time can save you thousands—and help you avoid getting flagged by the CRA. In this 2025 guide, we’ll break down common deductible expenses, highlight updates to CRA policy, and flag common audit red flags. Whether you’re a solopreneur or running a growing team, this guide will help you maximize your deductions with confidence.

What Is a Tax Deduction?

A tax deduction (also known as a write-off) reduces your taxable income by subtracting eligible business expenses from your total revenue. That means you only pay taxes on your net income—not on what you spent running your business.

To qualify as a deduction in Canada, the expense must be:

✔️ Incurred to earn business income

✔️ Reasonable and necessary for your operations

✔️ Supported by clear documentation (receipts, invoices, etc.)

Commonly Accepted Business Write-Offs in 2025

Here are the top deductions that most Canadian small business owners can claim:

1. Office Expenses

   ✦ Pens, paper, printer ink, software subscriptions (e.g., Adobe, Canva)

   ✦ Home office use (a portion of rent, utilities, internet—based on workspace size)

   
   

2. Business Travel

   ✦ Airfare, hotel, meals, and transportation for business trips

   ✦ Keep logs of travel purpose and keep receipts

   
   

3. Meals & Entertainment (50% rule)

   ✦ Client lunches and networking events—only 50% of the cost is deductible

   ✦ CRA expects you to document who you met and why

   
   

4. Vehicle Expenses

   ✦ Gas, insurance, repairs, lease payments (for business use only)

   ✦ Must keep a mileage log to distinguish between business and personal trips

   
   

5. Professional Services

   ✦ Bookkeepers, accountants, legal advice, consultants

   ✦ These are fully deductible if directly related to your business

   
   

6. Advertising & Marketing

   ✦ Social media ads, business cards, website hosting, brand design

   ✦ Promotional materials like flyers or sponsored events also qualify

   
   

7. Insurance

   ✦ Business liability, commercial vehicle, professional indemnity policies

   
   

8. Salaries and Subcontractors

   ✦ Employee wages, employer CPP and EI contributions

   ✦ Fees paid to freelancers or independent contractors

   
   

9. Training & Education

   ✦ Courses, workshops, and books that improve your business skills

   ✦ Must be directly related to your industry or work

   
   

What’s Not Deductible (Common Mistakes)

🚫Personal Expenses– You can’t deduct your personal groceries, clothes, or rent

unless it's strictly for business use.

🚫 100% of Meals– Only 50% is allowable

🚫 Fines and Penalties– Parking tickets and late fees are not deductible.

🚫 Club Memberships– Golf, fitness clubs, or social memberships aren’t deductible—even if you network there.

CRA Policy Updates in 2025: What’s New?

📌 Digital Recordkeeping Emphasis: CRA is cracking down on vague or missing documentation. Use cloud accounting tools like QuickBooks or Xero to organize receipts and logs.

📌 Home Office Claims Under Scrutiny: If you’re working hybrid or part-time from home, the CRA now wants clear proof that your workspace is used “exclusively and regularly” for business.

📌 Gig Workers and Side Hustles: CRA is paying more attention to informal business income. If you freelance or run a side hustle, report all income and track your expenses properly.

Red Flags That Can Trigger a CRA Audit

🔺 Claiming unusually high expenses compared to your income

🔺 Deducting 100% of meals, car use, or home office costs

🔺 Failing to report income from platforms like Etsy, Uber, or Upwork

🔺 Round-number expense claims (e.g., always writing off $500/month in gas)

Pro Tip: The best way to avoid an audit? Keep clean records, separate your business and personal finances, and work with a professional bookkeeper or accountant.

Final Thoughts

Understanding your allowable deductions isn’t just about saving money—it’s about staying compliant and protecting your business. As tax laws and CRA guidelines shift, keeping up-to-date and getting help from a professional can make all the difference.