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Updated Spring 2021 

American small businesses and sole proprietors:

Under the CARES Act, the allowable business interest expense deduction increased for some business entities from 30% to 50% of adjusted taxable income.

Canadian small businesses and sole proprietors:

Eligible employees who worked at home during 2020 due to the pandemic can use the new temporary flat rate method to simplify claiming the deduction for home office expenses for the 2020 tax year. This method can only be used for the 2020 tax year.

  • You are eligible to use the new temporary flat rate method:
    • You worked more than 50% of the time from home for a period of at least four (4) consecutive weeks in 2020 due to the COVID-19 pandemic.
    • You are only claiming home office expenses and are not claiming other employment expenses.
    • Your employer did not reimburse you for all of your home office expenses.
  • If you use this method, you can claim $2 for each day worked from home in 2020 due to the COVID-19 pandemic, up to $400.
  • You do not have to calculate the size of your work space or keep supporting documents.
  • Your employer does not have to complete or sign Form T2200S or Form T2200.
  • You can count the following as “work days” for the temporary flat rate method:
    • Days you worked full-time hours from home
    • Days you worked part-time hours from home
  • Days that cannot be counted include:
    • Days off (e.g., weekends and statutory holidays that you did not work)
    • Vacation days
    • Sick leave days
    • Other leave or absences

Employees can also use the detailed method to claim the home office expenses.

  • You are eligible to use this method if:
    • You worked more than 50% of the time from home for a period of at least four (4) consecutive weeks in 2020 due to the COVID-19 pandemic.
    • You were required to pay for expenses related to the work space in your home.
    • Your expenses are used directly in your work.
    • You have a completed and signed Form T2200S or Form T2200 from your employer.
  • You cannot claim any expenses that were or will be reimbursed by your employer and you must keep supporting documentation.
  • To simplify the process for using the detailed method, the CRA has introduced simplified Form T2200S and Form T777S, and an online calculator to help calculate your eligible home office expenses.

The enhanced first-year capital cost allowance (CCA) now includes vehicles and equipments that fall under new Class 56 — new and used fully electric or hydrogen powered automotive equipment and vehicles that currently do not benefit from the accelerated rate provided by Classes 54 and 55. The enhanced rate would apply only for the tax year in which the equipment or vehicle first
becomes available for use:

  • 100% after March 1, 2020 and before 2024
  • 75% after 2023 and before 2026
  • 55% after 2025 and before 2028

The CCA would be deductible on any remaining balance on a declining-balance basis at a rate of 30%.

For province and territory-specific tax changes, click here.

Updated Fall 2019 | IRS Highlights | Government of Canada Updates

American small businesses and sole proprietors:

The Tax Cuts and Jobs Act changed the way tax is calculated for most taxpayers, including small business owners and self-employed individuals.

  • It changed the tax rates and brackets, revised small business expense deductions, increased the standard deduction, removed personal exemptions, increased the child tax credit and limited or discontinued certain deductions. As a result, many taxpayers may need to raise or lower the amount of tax they pay each quarter through the estimated tax system.
  • Publication 505 has additional details, including worksheets and examples, which can help business taxpayers determine whether they should pay estimated tax.
  • The IRS also advises that all employees perform a checkup using the IRS withholding calculator.

March 2019 Update |(If you’re a US small business, make sure you’re aware of the potential implications of the Tax Cuts and Jobs Act (TCJA), which will affect how you record and claim your 2019 deductions when filing in January 2020.)

Canadian small businesses and sole proprietors:

The following changes apply to qualifying assets acquired after November 20, 2018:

  • Businesses can immediately write off the full cost of machinery and equipment used for the manufacturing and processing of goods.
  • You may also write off the full cost of specified clean energy equipment.
  • The Accelerated Investment Incentive lets businesses of all sizes in all sectors write off a larger share of the cost of newly acquired assets in the year the investment is made.

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The following changes apply after March 19, 2019:

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If you acquired a zero-emission vehicles after March 18, 2019, an enhanced first-year capital cost allowance (CCA) will be available:

  • 100% after March 18, 2019 and before 2024
  • 75% after 2023 and before 2026
  • 55% after 2025 and before 2028

After the first year the rate will be either 40% or 30% depending on your vehicle is Class 54 or Class 55.

Starting January 1, 2020, the Canada Revenue Agency will be allowed to send requirements for information electronically to banks and credit unions, rather than delivering them in person or by registered or certified mail

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Capital Expenses

Self-Employed Expenses 

Standard Business Expenses 

“The avoidance of tax is the only intellectual pursuit that still carries any reward.”
—Economist, John Maynard Keynes

While understanding which small business tax deductions you can claim is certain to benefit your bottom line, identifying these write-offs isn’t necessarily the easiest thing in the world.

In its Small Business Taxation Survey, the National Small Business Association (NSBA), stated that the stress and frustration associated with filing and completing federal income taxes was regularly ranked as one of the top concerns among US small business owners.

Of the more than 675 businesses surveyed:

  • 1-in-3 reported spending in excess of 80 hours — 2 full work weeks per year on tax compliance.
  • 1-in-5 spent more than 120 hours — 2.5 weeks per year.

The Small Business Tax Deductions You Need to Know 

While this list can help you prepare for an in-depth conversation with a tax expert, it does not replace the need for working with qualified bookkeeping and accounting professionals in order to keep your business on track and the Internal Revenue Service (IRS) or Canada Revenue Agency (CRA) happy. There’s also no better practice than to be proactive by having processes and strategies in place throughout the year in order to prepare for tax time.

“Many of my new clients that I take on come to me to put out fires. In most instances, this consists of years of unfiled corporate and sales tax returns, tax department audits and the worst bookkeeping jobs on the planet. The unfortunate results are backdated interest and penalties and costly unavoidable professional fees. All of this can be avoided by being proactive from the get-go with proper planning and advice. The problem is that many small business owners do not see the immediate value, until it’s too late and they are faced with compliance requests or even punitive penalties.” 

Daniel Talkins, Future Balance CPAs

“When calculating the cost of working with a qualified bookkeeper, think of what your own time as a business owner is worth. This is one of the hidden opportunity costs that is often overlooked by small business owners. It may be true that a dedicated owner can ‘figure it out’ when it comes to finding tax exemptions and keeping their own books. But, if your time is more valuable generating new sales or servicing your own customers, the cost of doing it yourself may be much higher than the monthly service cost for a good bookkeeper.”

Wade Farquhar, Lean Teams

Capital Expenses

Capital expenses are costs that represent an investment in your business, such as start-up costs or assets like buildings, furniture and machinery. (Another way to define capital expenses is that they are items with values that span more than one year. ) In terms of claiming them on your taxes, capital expenses aren’t taken all in one lump sum. Instead, the deductions are made over time allowing for a process of depreciation or amortization.


According to legal advice site, Nolo, depreciation, as it relates to taxes, is a deduction taken in incremental amounts over a number of years. When considering the acquisition of capital assets, it is best to plan ahead, considering the pros and cons of the immediate investment and the long-term benefits, including depreciation.

United States

Under certain conditions, small businesses may deduct:

  • First-Year Bonus Depreciation — intended as a form of economic stimulus, this deduction gives small businesses the opportunity to write off a higher percentage of a new, long-term asset’s cost.  (April 2018 IRS update.)
    • Under the TCJA, property placed in service after September 27, 2017, and before January 1, 2023, is 100% deductible.
    • Bonus depreciation for qualified property that a taxpayer acquired before September 28, 2017, and placed in service before January 1, 2018, remains at 50%.
  • Section 179 Depreciation — You may expense the cost of any section 179 property and deduct it in the year the property is placed in service. (April 2018 IRS update.)
    • The maximum deduction is $1 million. | The phase-out threshold is $2.5 million. Both will be adjusted for inflation.
    • These items must be long-term, tangible property that you use in your business more than 50% of the time.
    • This rule cannot be used for land, permanent structures attached to land, inventory, patents, copyrights or trademarks, air conditioning or heating units or foreign, leased, inherited or gifted property.
    • You may also not deduct an amount greater than your net taxable income.


“Depreciation is broken down over the useful life of an asset to ensure that the cost incurred to obtain that asset is matched to the revenue generated from that same asset. More simply, the cost of an asset is smoothed out over a number of years to reflect its use and revenue-generating potential over it’s life-cycle​.”

—Lior Zehtser, Connect CPA

  • There are various classes of depreciable property for tax purposes, called Capital Cost Allowances (CCA). The asset class and percentage that may be deducted will depend on various definitions and categorizations.



Costs of Goods and Services

Manufacturers and resellers may capitalize some of the direct and indirect costs of production and resale activities, including raw materials, freight, labor, factory overhead, rent, taxes, purchasing, processing, repackaging, handling and administrative costs.

Pre-planning is always advisable in matters related to taxation. The shared border between the United States and Canada can provide some distinct advantages to businesses (even small businesses) that understand which country offers the most beneficial climate for their particular business activity. Currency differences, different taxation laws and different employee healthcare systems are just a few of the areas where businesses can save with a little forethought.

Wade Farquhar, Lean Teams

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Start-up and Organizational Costs

Start-up costs are expenses that result from creating a business. Organizational costs are expenses that come from establishing or organizing a business as a partnership or corporation. Both may be claimed as small business expenses.

United States

  • If you spent up to $5,000, you may deduct the full amount in the first year without having to capitalize the expense.
  • If your costs were more than $5,000, the sum will be amortized over a period of 180 months (15 years).
  • Costs greater than $50,000 are subject to certain limitations.


  • To claim start-up costs you have to be very detailed about the date that you started your business.
  • In order to deduct start-up expenses, you have to prove that they took place during a relevant fiscal period.

Self-Employed Expenses

Because some businesses are not incorporated and are considered self-employed individuals (sole proprietors, contractors and partnership members who carry on a trade or business), they are allowed certain deductions — taken as part of their personal income tax filings.

Note: Many things, including tax deductions, are determined by how your company is structured. If you plan to grow significantly and add employees, speak with a professional about the proper way to incorporate your business and the resulting tax implications. 

Health Insurance Premiums

Here’s to your health and potential deductions for health insurance premiums.

United States

  • If you’re self-employed (or own more than 2% of your S corporation), you may deduct premiums paid for yourself, your spouse, your dependents and any child under 27 on your personal income tax.


  • If your net self-employed income is more than 50% of your income or your income from other sources is less than $10,000, you may claim private health service plan (PHSP) premiums.
    • As of January 1, 2015, the following conditions must be met in order for the CRA to consider a plan to be a private health services plan (PHSP):
      • All of the expenses covered under the plan are:
        • Medical and hospital expenses (medical expenses).
        • Expenses incurred in connection with a medical expense and within a reasonable time period following the medical expense (connected expenses).
        • A combination of medical expenses and connected expenses.
      • All or substantially all of the premiums paid (generally 90% or more) relate to medical expenses that are eligible for the medical expense tax credit (METC).
      • The plan meets the conditions outlined in paragraph 3 of the Interpretation Bulletin IT-339R, Meaning of private health services plan [1988 and subsequent taxation years]

Moving Expenses

Boxes, boxes and more boxes. On the bright side, if you’re self-employed, you may be able to write off some of your moving expenses.

United States


  • You may claim moving expenses if you have moved to a new home in order to work or run a new business at a new location.
  • If your office is outside your home, your new home must be at least 40 km from your new place of work.

Retirement Plans

If you have private retirement plans, your contributions may count as write-offs.

United States

  • You may claim contributions (up to certain limits) to qualified retirement plans, including SEP IRAs, SIMPLE IRAs and 401(k)s.


  • You may deduct eligible RRSP and PRPP contributions.
  • You are also required to attach receipts as proof of these contributions.

Self-Employment Taxes

In both the United States and Canada, you are eligible to deduct portions of your mandatory contributions to government programs.

United States

  • You may deduct 50% of the social security and Medicare taxes that you are required to pay on a quarterly basis as part of being classified as self-employed.


Student Loan Interest

If you’re making student loan payments for yourself or a dependent, you may deduct the interest on your taxes. This applies in both the United States and Canada.

Standard Business Expenses

A small business expense is a cost you incur as part of doing business. There are lots of fancy words and terminology thrown around this concept, but it basically boils down to common sense. If an expense is a normal, expected cost for your industry, you can generally claim it. If it feels like a stretch, it just might be.


In both the United States and Canada these costs are deductible. However, in Canada, the requirements for deducting advertising costs are more strict.

United States

  • You may deduct anything from billboards to business cards, including:
    • All the costs related to the creation and maintenance of your website.
    • Promotional and branded items like key chains, coffee mugs, stress balls, t-shirts, etc.
    • Notable exceptions include political ads.


  • Business may deduct expenses for ads placed in Canadian media (newspapers, radio and television).
  • Special ratios and restrictions apply for magazine advertisements.
    • You may claim 100% if you’re marketing to Canadians and 80% of the magazine is editorial content.
    • You may only deduct 50% if the editorial content is below 80%.
  • You may claim costs for business cards and finders fees.
  • Online advertising is fully deductible, including domain name registration and web hosting.

Bad Debt

If you have unpaid invoices, you may be able to deduct them. However, you will have to provide documentation that these debts are uncollectible.

United States

  • Qualifying for this deduction depends on your whether you sell good or services:
    • Funds that you’ve lent to employees, vendors or other businesses that are not repaid may be allowed as a deduction.
    • If your business sells goods, you may deduct the costs of unpaid purchases.
    • The same rule applies for businesses who sell services.


  • The debt must have occurred in the fiscal year.
  • You must also count this debt as income.

Bank Fees

In both the United States and Canada, bank fees, such as ATM withdrawal charges, wire transfer fees and other bank services are regular operating expenses that may be taken as tax deductions. 

Car and Truck Expenses

If you are using your personal car or truck to drive between worksites, visit clients or for other routine business practices, you may write off operating and maintenance expenses including:

  • Loan or lease payments
  • Fuel
  • Insurance
  • Parking and tolls
  • Repairs
  • Registration fees

Note: If you’ve actually purchased the vehicle for the company, it is considered a capital expense.

United States

  • You may deduct these costs by using standard mileage rates or actual expenses.
  • Mileage rates are updated each year.
  • You cannot deduct the cost of traveling between your home and your regular place of business. These costs are considered personal commuting expenses.
  • If you have an electric car, you may qualify for a tax credit.  However, the credit for purchasing a Tesla will begin to be phased out starting January 1, 2019.
  • For more information, refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses

Our friends at MileIQ passed along this important note for the 2018 tax year and going forward:

  • W2 employees can no longer deduct unreimbursed expenses, like mileage.
  • Self-employed business owners, freelancers or nearly anyone who receives a 1099 can still deduct their mileage as a small business expense.


Tip: Keeping a log of business mileage is a valuable tool for documenting your car and truck expenses. (It’s also required in Canada.) While pen and paper will work, many expense tracking apps also feature mileage logs. 

Charitable Donations

Most businesses choose to make charitable donations as part of a commitment to core values and community service. In addition to the social good, charitable donations can also help at tax time.

United States

  • Donations made by self-employed individuals, sole proprietor, partnerships, limited liability companies (LLCs) and S corporations are claimed on personal income taxes.
  • Regular (C) corporations, may deduct charitable contributions from business income taxes.


  • The maximum amount that can be claimed is 75% of your net income.

Conventions and Trade Shows

Networking isn’t the only perk, you may also write off the costs of trade shows and conventions.

United States

  • You must prove that the event is related to your business.
  • If you travel internationally, you also have to validate why this travel is required.
  • You can deduct up to $2,000 each year for trade shows and conventions held on cruise ships.


  • You may deduct the cost of attending up to 2 business conventions, located in either Canada or the United States.


Whether you’re brushing up on some key skills or covering new ground, you may claim most education expenses as deductions.

United States and Canada

  • You may deduct education expenses related to your business.
  • Seminars, conferences and trade shows are also covered.
  • Interest on student loans may be deducted on your personal income tax.


The premiums you pay to protect your business can also be used to reduce your tax burden.

United States

  • General business, malpractice, business continuation and any other business risk coverage is fully deductible.
  • Under the Affordable Care Act, small businesses may qualify to claim a health care tax credit of up to 50% on their insurance premiums.


  • You may deduct the cost monthly of premiums for liability, property and business interruption insurance using Line 8690 of your T2125 Statement of Business Activities form.
  • Personal life insurance premiums cannot be claimed as a deduction unless the policy is used to ensure the life of a key operational figure and the beneficiary is the company.
  • Deductions for home insurance premiums are filed under the home office deduction.
  • Deductions for personal automobile insurance premiums are filed under motor vehicle expenses.

Intangibles — Goodwill, Franchises, Concessions, Licences, Trademarks, Patents, etc.  

Expenses related to the purchase, registering or protection of intellectual property are generally deductible.

United States

  • Some costs like licensing fees are considered capital expenses that must be depreciated over time.
  • Others expenses, like franchises, trademarks and trade names, may be fully deducted in the same year the costs were incurred. However, certain qualifications and restrictions apply.


  • In Canada, goodwill, franchises and concessions, are considered “eligible capital property” and must be depreciated over time.


Interest on any loans used specifically for your business is deductible. However, you will need to ensure that you have records proving business use.

United States

  • You may deduct the interest paid on funds borrowed for investment purposes.
  • You may also deduct interest from business loans and credit cards.


  • Businesses may claim interest on any funds borrowed for business purposes.
  • You may deduct fees for reducing interest rates or early payment as a prepaid expense.
  • Standby charges, guarantee fees, service fees or any other similar fees may be deducted in the year you incur them.
  • You may deduct interest paid on a loan made against an insurance policy, as long as the interest you isn’t paid to the policy’s adjusted cost base.
  • Interest on property improvement loans is capitalized over five years.
  • There are limits on the interest you can deduct for personal vehicle loans or vacant land.

Home Office Deductions

If you are using your home as a primary place of business, you may be eligible to claim, interest on your mortgage (or a portion of your rent), utilities, property taxes, upgrades, repairs and maintenance, homeowner’s or renter’s insurance and even cleaning supplies.

  • The amount you are able to claim is determined by how much of your home is dedicated to office space.
    • For example, if you have a 2,500 sq. ft. home and you use 625 sq. ft. as your office, 25% of direct and indirect expenses are eligible as deductions.
  • The rules that apply are fairly similar for both the United States and Canada.
    • However, there are two methods for claiming home office deductions in the United States — the simplified and regular method.

Legal, Accounting and Professional Fees

Legal, bookkeeping, accounting, tax preparation and other professional service fees that you accrue in the course of doing business may be deducted.

United States

  • You may also deduct the cost of business books, industry magazines, online subscriptions and professional associations.
  • The costs of these professional services must be related to the current fiscal year.
  • If the services provided counts to future years, the costs must be deducted over the lifetime of the benefit.


  • You may deduct membership dues and fees for professional trade and commercial organizations.
  • All professional and consulting fees are fully deductible and must be related to the current fiscal year.

Maintenance, Repairs and Renovations

Depending on the nature of the work, these costs may either be considered standard deductions or capital expenses.

United States

  • Routine maintenance and repair costs (those that take place within the fiscal year and don’t have value the extends beyond this time frame) are deductible.
  • Enhancements to real estate or the rebuilding of equipment that enhances the asset’s value, increase the length of use or adapts it to a different use must be capitalized.
  • Section 179 Depreciation allows for the full deduction of improvements on leasehold properties. (Excluding building expansion and/or adding elevators.)
  • You may be eligible to deduct upgrades that improve energy efficiency.


  • You may deduct the cost of labor (professional and third-party only) and materials required for minor repairs.
  • Renovations or repairs that extend the useful life of your property or improve it beyond its original condition are considered capital expenses.
  • Expenses that recur over a short period of time or restore a property to its original condition are considered current expenses.

Meals and Entertainment

All work and no play can make one very hungry and quite lonely. Thankfully, for the most part, the IRS and CRA seem to understand that food and entertainment are part of doing business.

United States 

(The TCJA used some wording that confused many people about what’s deductible and what isn’t in terms of meals and entertainment. This article from the Journal of Accountancy helps clarify.)

  • You may deduct 50% of the amount spent on business meals and entertainment.
    • Exceptions include lavish and extravagant meals.
    • At least one employee must be present at the meal or outing.
    • The food and beverages must be provided to a current or potential business customer, client, consultant or similar business contact.
    • Food and beverages provided during or at an entertainment activity may only be deducted as long as they are purchased separately from the entertainment or the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts.
  • You may deduct 100% of the costs of:
    • Company cafeterias and executive dining rooms.
    • Recreational and social activities held for employees.
    • Meals provided as compensation or part of the company culture.


  • You may deduct 50% of the amount spent on business meals and entertainment.
  • You may deduct 100% of the costs for up to six (6) team events or parties.
  • You may also deduct all of the costs for meals and entertainment related to a fundraising event for a registered charity.
  • Receipts are required for all of these expenses. (It also helps to make notes on the back of credit card or cash register receipts documenting the business use.)

Non-Cash Gifts and Rewards

A gift or reward doesn’t always have to be cash. You may also be able to claim non-cash gifts and rewards as deductions.

United States

  • You may only deduct $25 in non-cash gifts to each employee.
  • The maximum deduction amount for non-cash achievement or service awards given to any one employee is $1,600.


  • You may deduct up to a combined total of $500 in non-cash gifts per year.


Office Supplies, Tools and Services

Did you know that box of paper clips you just bought can actually be claimed as a tax deduction? The costs of many other common business tools and services may also be written off.

United States

  • You may claim:
    • Day-to-day shipping, courier, postage and other delivery services. (Shipping and freight as part of the manufacturing process is claimed under the costs of goods and services.)
    • You may deduct most office supplies and like costs as long as they are used within the year they are purchased.
    • You may deduct phone, internet or utility (gas, oil, water, etc.) expenses related to your business. (Note: If you office at home, these items are claimed under the home office deduction.)


  • You may claim:
    • Landline, internet and utilities.
    • Day-to-day shipping, courier, postage and other delivery services. (Shipping and freight as part of the manufacturing process are claimed under the cost of goods and services.)
    • Rental fees for leased computers, fax machines, etc.
    • Indirect supplies like medicines for veterinary practice or cleaning supplies for a carpenter.
    • Cleaning supplies.
    • Small items like pens, paper, paperclips, etc.
  • The following should be claimed as capital expenses:
    • Office furniture, including desks, chairs and filing cabinets.
    • Computers and software.

Qualified Business Income 

United States

  • Starting January 1, 2018, (meaning it can be claimed when you file in 2019), sole proprietors, S corps and partnerships, otherwise known as pass-thru entities, can claim a 20% deduction on qualified business income. This new rule is known as Internal Revenue Code Section 199A  (new IRC Sec. 199A).
  • This is still a new rule, which means that it’s best to seek professional guidance on how it should be applied. (IRS FAQ 2019)


  • The Small Business Deduction (SBD), lets qualified businesses claim 17.5%  of whichever of these amounts is less:
    • Income from active business conducted in Canada.
    • Taxable income.
    • The business or reduced business limit.
  • This rate was 17% before 2016.
  • The SBD excludes personal service businesses.

Rent and Property Leases

You may claim rent paid on office space and other business properties.

  • If you work from a home office, a percentage of the rent on your home can be claimed under the home office expense.
  • It is recommended that you keep copies of the lease agreements and rent receipts, as you will be required to provide these documents should you be audited.
  • The rules are fairly similar in the United States and Canada.
  • In the United States, you may not claim this deduction if you own any equity in the building where you rent.
  • You may also claim rental payments on machinery and equipment.

Research and Development (R&D)

In order to spur innovation and economic development, both the United States and Canada offer research and development credits, which are like small business tax deductions, only better.

United States

  • Small businesses (those with an average of less than $50 million in gross revenue over the prior three years) may now offset previously restrictive requirements with R&D credits generated after January 1, 2016, in order to better access the Federal R&D Tax Credit.
  • Start-ups (with less than $5 million in gross receipts and no more than five years of gross receipts) may also now allocate up to $250,000 of federal R&D tax credits generated after January 1, 2016, to offset the FICA portion of their payroll taxes.


  • Through the Scientific Research and Experimental Development (SR&ED) Tax Credit Program, Canadian-controlled businesses (including small businesses and startups) can earn an investment tax credit (ITC) of 20-35%.
  • It is a refundable tax credit, so even if your business fails to make a profit, you will still receive a cash refund.
  • It allows you to deduct the full amount of expenditures in the year they were incurred.
  • Unused deduction amounts may also be carried over to the following year.

Salaries and Wages

The wages and benefits you provide for employees are not a one-way street. In addition to rewarding a job well done, certain components of payroll and other compensation are deductible (including the cost of online payroll applications and tools).


United States

  • Employers may deduct:
    • Employer-paid taxes (payroll taxes) including:
      • Employer contributions paid for social security and Medicare (FICA) taxes
      • Employer contributions for federal (FUTA) and state (SUTA) unemployment taxes.
  • Salaries and wages
    • Bonuses, commissions and awards
    • Benefit programs — life insurance, education reimbursements, etc.
    • Meals and lodging provided as part of the workplace
    • Per diems and allowances
    • Fringe benefits
    • Contract labor — if the contractor (freelancer or service provider) was paid $600+ during the year. (Documented by Form 1099-MISC.)
    • Employer credit for paid family and medical leave


Using Line 9060 on Form T2125, employers may deduct the following wage-related expenses:

  • Payroll taxes (source deductions) including:
    • Canada Pension Plan (CPP) and/or Quebec Pension Plan (QPP) contributions.
    • Employment Insurance (EI) premiums.
    • Workers’ compensation accounts.
  • Any premiums paid for employee illnesses, accidents, disabilities or income insurance plans.
  • Any salary you pay your child, spouse or common-law partner.


In both the United States and Canada, you may deduct phone, internet or utility (gas, oil, water, etc.) expenses related to your business. (Note: If your office is home-based, these items are claimed under the home office deduction. )


You can actually deduct taxes from your taxes. It may sound like double-speak, but it’s true.

United States

Employers may deduct:

  • Employer-paid payroll taxes.
  • Sales tax on day-to-day items (included in the cost of the items — sales tax on larger assets will be added to the total cost and depreciated as a capital expense).
  • Excise and fuel taxes.
  • State income tax — as an itemized deduction.
  • Real estate taxes on business properties.


  • Employer-paid payroll taxes.
  • You may deduct the cost of property taxes.
  • If you office at home, property tax claims are taken under the home office deduction.
  • The goods and services tax (GST) and harmonized sales tax (HST) paid on business expenses are considered input tax credits (ITCs).


When you travel overnight for business, you may claim the costs of transportation (car, bus, train, plane, etc.), accommodations, meals, shipping materials, phone calls and tips.

United States

  • If you bring friends or family along, you may only expense your costs related to your business. (Unless your friend or family member is an employee.)
  • Factors like the percentage of time spent on business, destination (domestic or international) and length of stay all affect the <a id=”Travel Link TOC” name=”Travel Link TOC%