What Sole Proprietors Can Deduct

Business tip

What sole proprietors can deduct

The rule of thumb: an expense has to be reasonable and incurred to earn business income.

The basics

Deductible vs. not.

Usually deductible

Advertising, office supplies, software, professional fees, business insurance, bank fees, and the business share of phone and internet.

Not deductible

Personal spending, and your own pay. As a sole proprietor you don't pay yourself a salary — you take the profit.

Vehicle

Only the business share counts.

Keep a logbook of business kilometres against total kilometres. Your deduction is the business-use percentage of fuel, insurance, maintenance, and similar costs.

Home office

Workspace-in-home has rules.

The space generally has to be your principal place of business, or be used only for the business and regularly to meet clients. The deduction can bring your business income down to zero but can't create or increase a loss.

Meals

Meals and entertainment are limited.

In general only 50% of qualifying meal and entertainment costs can be deducted. Keep the receipt and note who and why.

Big purchases

Equipment is usually deducted over years.

Larger assets like computers, tools, and vehicles are typically written off gradually through capital cost allowance rather than all at once. Some exceptions exist, so check the current rules.

The habit

Save the receipt the day you get it.

Missing paperwork is the most common reason a legitimate deduction gets disallowed. A photo in a folder beats a shoebox in April.

Tickle & Compass

Save this, then check your GST/HST.

GST/HST basics →

General information, not tax, legal, or financial advice. Rules vary by province and change — confirm with an accountant.