7 Essential Steps to Track and Claim Business Deductions

Sole ProprietorBookkeepingCorporate TaxationPersonal Tax

May 1

What Actually Counts as a Business Deduction

(And How to Not Lose Track of It!)

Here is something I hear from business owners all the time:
"I just throw everything in a folder and deal with it at tax time!"

And I get it. When you are running a business, tracking expenses is not the thing keeping you up at night. But that folder approach? It’s actually costing you money.

Not because you are doing anything wrong, just because things get missed, receipts disappear, and by April you are trying to remember if that dinner in October was a client meeting or a birthday.

So let's talk about how to actually stay on top of this, in a way that does not require you to become an accounting nerd.

What Even Qualifies?

A business deduction is any reasonable expense you incur to earn business income. That is the CRA's language, and it is deliberately broad because legitimate business expenses genuinely vary by industry.

Common ones include office supplies, advertising costs, professional fees, software subscriptions, vehicle expenses, and a portion of your home office if you work from home. Meals and entertainment are partially deductible (50%, with conditions). Bigger purchases like computers or equipment get claimed differently since they are considered capital assets and written off over time rather than all at once.

The word "reasonable" is doing a lot of heavy lifting in that CRA definition. If the expense makes sense for your type of business and was genuinely incurred to generate revenue, you are likely in good shape.

But if it is a stretch, it is worth a conversation with your accountant before you claim it!

The Easy Part Most People Skip

Separating your business & personal spending.

Listen, I know it’s not the most glamorous advice, but it is the single, most impactful thing you can do to protect yourself AND simplify your life!

A dedicated business bank account and a business credit card make this clean and easy. Every business expense should only flow through those account; Nothing. Else.

That way, when it comes time to review your records or file your return, everything is already right there, in the right place!

I have had clients come to me after years of mixing everything together in one account and we spend more time sorting that out than we do on actual tax strategy. That time has a cost.

Keeping Records: The Six Year Rule

The CRA requires you to keep records for at least six years.

That means receipts, invoices, contracts, and anything that supports the deductions you are claiming.

Going digital is the easiest way to stay on top of this. A quick photo of a receipt the moment you get it, filed in the right digital folder or within your accounting software, means nothing gets lost and you aren’t hunting through a messy drawer in March.

If you are not using accounting software yet, even a well-organized spreadsheet and/or an app like Dext or Hubdoc is better than nothing.

The goal is that if CRA ever asks, you can produce documentation quickly and confidently.

What Monthly Habits Actually Look Like

Year-end panic is almost always a symptom of not doing anything through the year.

I know it sucks, but blocking out even just 30 minutes a month to properly categorize your expenses changes everything:

You’ll often catch things you might otherwise forget,
You start to notice spending patterns,
And when it’s time to file, your bookkeeper or accountant is not starting from scratch. (win-win!)

If you have a bookkeeper handling this, great! But make sure you’re still reviewing the reports: you know your business better than anyone, and a quick monthly review means nothing unusual slips through the cracks!

When to Loop In Your Accountant

Some deductions are easy to spot.
Others take a closer look.

Home office claims, vehicle use, shareholder expenses, meals and entertainment, and anything involving a related party tend to have more nuance to them.

If you’re unsure whether something qualifies, or you are claiming something for the first time, it is worth a quick check before you file rather than a correction after.

And if your business is growing, your tax situation is probably getting more complex. And that’s actually a good problem to have!

But it’s also the point where proactive planning matters more than ever, because there is more to optimize and more to get right.