Top 13 Small Business Deductions and Expenses to Claim in 2026

Taking advantage of the Small Business Deduction (SBD) and claiming business expenses on your taxes can save you some serious cash. If you don’t know if you qualify for the SBD or what tax deductions are available for companies like yours, you could be paying more taxes than you need to.That’s money you could be spending on growing your business.

In this article, we’ll explain how eligible companies can access the Small Business Deduction Canada provides. We’ll also offer an overview of some of the main tax deduction categories for small businesses and give you a list of the top small business tax deductions you can (and should) claim when you file your taxes this year.  

Key takeaways

• The Small Business Deduction can lower your corporate tax rate: Eligible Canadian-controlled private corporations (CCPCs) can access a reduced federal tax rate of 9% on up to $500,000 in active business income, subject to eligibility requirements.
• Claim eligible business expenses to reduce taxable income: Common tax deductions include salaries, office expenses, software subscriptions, advertising, professional fees, business travel, and vehicle costs.
• Organize expenses throughout the year: Categorize transactions and keep receipts as you go to make tax filing easier and identify eligible deductions without scrambling at year-end.

What is the small business deduction?

The Small Business Deduction (SBD) is a rate reduction tax benefit for small- and medium-sized businesses that reduces the total corporate income tax you owe in a given year. It’s a pretty sweet deal. Normally, Canadian corporations pay the federal tax rate of 15%. With the SBD, companies can get a reduced tax rate of 9% on up to $500,000 of active business income (ABI)—the total income generated from your business operations for the year.

How to qualify for small business deductions

Depending on the size and type of business you run, figuring out if you qualify for the SBD can be kind of complex. We’d definitely recommend reaching out to a tax professional to see if you can take advantage of this benefit.

The Small Business Deduction Canada offers is only available for Canadian-controlled private corporations (CCPCs). This means that businesses controlled by one or more non-residents (i.e., one of the owners is from the US) or another public corporation aren’t eligible. Those that list shares on the stock exchange also aren’t eligible.

To qualify for the SBD, your business must have less than $10 million in taxable capital employed in Canada across all associated corporations. Taxable capital is different from taxable income. Capital refers to the total financial resources you use to generate income for your business, including shareholders' equity, surpluses and reserves, and loans and advances received during the year.

If your business has between $10 million and $50 million in taxable capital, you can still take advantage of the SBD benefit. However, the amount of ABI that qualifies for a reduced tax rate goes down as taxable capital increases. Earning over $50,000 in aggregate investment income also lowers the total ABI that qualifies for the reduced tax rate. If you earn over $150,000 in investment income (very impressive), you can’t get the SBD.

Each province and territory has its own SBD benefits that can reduce the provincial tax you owe, which kicks in if you qualify for the Small Business Deduction Canada offers.

NOTE: The SBD only applies to incorporated businesses. Sole proprietors and partnerships are taxed differently and don’t qualify for the SBD.

What are the tax deduction categories for small business?

In addition to the federal and provincial Small Business Deduction, you can also deduct or “write off” business-related expenses to reduce your total taxable income and, therefore, the total tax you’ll pay. Generally, any money you spend to run your business is a business expense. You might be tempted to claim your daily espresso as a business expense (how would your company function without caffeine?) but the Canada Revenue Agency (CRA) has some rules around what you can and can’t deduct from your taxable income.

It’s smart to organize your transactions into CRA-recognized categories as you go, rather than waiting until month-end or *shudder* until you need to file your taxes. This makes month-end closing much less stressful. When tax season rolls around, you can easily report your properly categorized expenses and claim them.

Your accounting software may have built-in expense category suggestions that align with CRA categories. If you’re tracking expenses manually with a spreadsheet, you might want to familiarize yourself with the official CRA categories so you can label your transactions accordingly.

The CRA has a comprehensive list of expenses businesses can claim as deductions. Here are just a few tax deduction categories that might apply to your small business:

• advertising
• business tax, fees, licenses and dues
• business-use-of-home expenses
• capital cost allowance
• delivery, freight and express
• fuel costs
• insurance
• interest and bank charges
• legal, accounting and other professional fees
• maintenance and repairs
• management and administration fees
• meals and entertainment
• long-haul truck drivers
• motor vehicle expenses
• office expenses
• rent
• salaries, wages and benefits
• supplies
• telephone and utilities
• travel

FYI, small businesses usually have until April 30 to file taxes each year, while sole proprietors typically have until June 15 (though they are not eligible for the SBD). Corporations must file their taxes within six months of the end of their tax year.

Top 13 small business tax deductions

If you’re wondering, “What can I write off on my taxes?” check with an accountant or tax expert to ensure you claim the right expenses and identify ones you might not realize you can claim. You don’t want to miss tax savings you could reinvest in growing your business.

Beyond the SBD, here are 13 small business tax deductions that can help you reduce your taxable income, including a few you might miss when you’re getting your expenses together at tax time:

1. Startup costs

Getting a business off the ground comes with plenty of expenses, and some of them may be tax-deductible. This can include fees for setting up your business, obtaining licenses and permits, and getting professional advice from a lawyer or accountant. Keep track of these early expenses, even if you incur them before your business starts earning revenue. How you deduct them depends on the expense type and applicable CRA rules, so check with a tax professional to make sure you’re claiming them correctly.

Examples: Business registration fees, lawyer fees

2. Salaries, wages and contractor fees

You can deduct the gross salary you pay your employees, which is their salary before taxes, benefits and any other payroll deductions that come off their paycheque. You can also claim payments to contractors or freelancers who provided services for your business, such as a designer you hired to update your website. You can also include wages paid to a spouse or child in your salary write-offs.

Examples: Employee wages, freelance graphic designer fees

3. Cost of goods sold (COGS)

If you make and sell physical goods or run a food-based business, you can claim the supplies, materials, ingredients and packaging you use to create the products you sell. If you run a service-based business, you can also claim the cost of supplies you use to get the job done. For example, a cleaner can claim the cost of the cleaning tools and products they use in their clients’ homes.

Examples: Raw materials for products, packaging for custom orders

4. Office expenses

You can claim the cost of rent, utilities and internet at your office space. You can also claim everyday items you use while you work like stationery, furniture and computers or tablets as long as you can prove these items are used for business purposes. If you work from home, you can also claim a portion of your bills on your taxes. If you work from home, you can still make office expense claims. An accountant can help you ensure your claims related to working from home are done correctly. 

Examples: Office rent, printer paper and stationery 

5. Business software

When you’re calculating your office and operating expenses, don’t forget about your software subscriptions, which are also part of the above category. This could include your accounting software, inventory or customer management software and collaboration solutions like Microsoft 365 or Google Workspace.

Examples: Accounting software subscriptions

6. Advertising

Getting the word out about your business can be costly, and many advertising expenses are tax-deductible. Along with digital ads, Canadian radio and television spots, and newspaper advertising, you may be able to claim expenses like promotional merchandise, branded giveaways, sponsored events and trade show advertising. You can also deduct eligible costs to run your business website, including domain registration and hosting fees. Keep in mind that the CRA has restrictions on certain advertising expenses, including advertising in foreign media, so check the rules before claiming them.

Examples: Branded promotional merchandise, trade show sponsorships

7. Interest and banking fees

No one loves racking up interest, but hey, at least paying interest on your loans or mortgages on the property you use to do business (or home office space) can lower your taxable income. If you meet the CRA’s criteria, you may be able to claim a portion of these fees. You can also claim banking fees, including account service fees and fees to lower loan interest.

Examples: Business loan interest, monthly business account fees

8. Legal, accounting, consulting and professional fees

Getting advice from someone about your taxes or contracts? Hired a business coach? You can claim what you pay to professional service providers like lawyers, bookkeepers and accountants, as well as consultants who help you improve your business and expand your skills. If you’re a member of a commercial or trade organization, you can also deduct membership fees or dues.

Examples: Accountant fees, legal advice for business contracts

9. Business travel, meals and entertainment

Turns out, the CRA does want you to have a little fun sometimes. In general, you can claim 50% of meals, beverages and entertainment associated with running your business, such as staff parties, client dinners or business travel. You can also claim the cost of travelling including flights, hotels and transportation.

Examples: Flights for a business trip, meals with clients

10. Vehicle and fuel costs

You can claim the costs associated with running and maintaining the vehicles you use in your business, which could include machinery or the cars your team uses to deliver products or drive to work sites (sorry, the car you use to commute to work doesn’t count). The cost of fuel, repairs, new tires and car insurance can be written off as business expenses.

Examples: Fuel for delivery vehicles, car maintenance and repairs

11. Capital cost allowance (CCA)

Buying equipment for your business can be a significant expense, but you may be able to deduct its cost over time through capital cost allowance (CCA). The CRA generally treats assets like computers, office furniture, machinery and other equipment as capital property rather than everyday operating expenses. Instead of deducting the full cost in the year you buy an asset, you can usually claim a portion of its depreciable cost each year, based on the asset's CCA class and applicable rules. Keep records of your purchases so you can calculate your claim correctly.

Examples: Office computers, manufacturing equipment

12. Insurance 

Running a business comes with risks, and the right insurance can also qualify as a deductible expense. Depending on your business, this could include commercial property insurance, general liability coverage or professional liability insurance. Track your premiums and make sure the policies match your business operations. If a policy covers both personal and business use, you can generally only deduct the portion that applies to your business.

Examples: Commercial property insurance, general liability insurance 

13. Other taxes

Property taxes on your office or home office space can be deducted as business expenses. It’s also important to ensure you’re not including the government sales tax (GST), provincial sales tax (PST) or harmonized sales tax (HST) that you’ve collected from customers as a part of your total taxable income.

Other less common small business tax deductions

Beyond the most common write-offs, your business may qualify for easy-to-overlook deductions. Here are a few less obvious expenses and investments to discuss with your accountant.

• Bad debts: If your business uses accrual accounting and a customer owes you money that you can no longer collect, you may be able to deduct the amount as a bad debt, provided it meets CRA requirements.
• Charitable donations (for corporations): Incorporated businesses may be able to deduct eligible donations made to registered charities and other qualified donees. Keep official donation receipts and check the CRA's rules for claiming corporate donations.
• Accessibility renovations and equipment: Businesses may be able to deduct certain costs associated with accessibility improvements, such as wheelchair ramps, accessible door openers and specialized equipment. The tax treatment depends on the expense type and applicable CRA rules.
• Certain business investments: Some investments in activities such as scientific research and experimental development (SR&ED) or eligible clean technology may qualify for specialized tax incentives. These are often tax credits rather than standard business expense deductions, and eligibility depends on the investment and applicable program rules.

Float makes it easy to get your expenses in order

Float combines intuitive expense management software with flexible corporate cards. When you use Float, all your transactions—including employee purchases like travel, food, office and fuel expenses—land in the same place and are automatically organized into categories that match up with your accounting software. You can also proactively control your expenses with Float cards. In addition to setting spend limits on each card, you can also restrict where the cards can be used to ensure your team spends funds in the right places.

If you’re tired of chasing down receipts and sorting through transactions coming in from all your bank accounts, try Float free and make expense tracking and categorization seamless. Future you during tax season will thank you.