Common expense categories are starting points, not automatic deductions
The CRA lists categories such as advertising, insurance, business taxes and licences, office expenses, professional fees, maintenance and repairs, rent, telephone and utilities, travel, and motor-vehicle expenses. A purchase still has to meet the rules for that category, be reasonable, relate to earning business income, and respect any limits.
“Write it off” is poor record-keeping language. Record what was bought, why the business needed it, when it was used, how it was paid, and whether any personal use was involved.
Current expenses and capital property
Routine supplies and recurring operating costs are often current expenses. A purchase that creates a lasting benefit, acquires a long-lived asset, or improves property beyond its original condition may be capital. Depreciable capital property may be claimed over time through capital cost allowance rather than as one ordinary expense.
The distinction is fact-specific. A normal repair to equipment can differ from an upgrade that materially improves it. Review the CRA's current-versus-capital factors and seek advice for large tools, vehicles, trailers, equipment, or renovations.
Mixed business and personal use
Only the business portion of a mixed-use expense belongs in the business expense calculation. Keep a reasonable record of the allocation. For a vehicle, that commonly means a mileage log; for phone or internet, it may require a supportable usage calculation. Different categories have different rules, so one percentage should not be copied across every expense without analysis.
Records and receipts
Keep sales invoices, purchase receipts, contracts, bank and card statements, mileage logs, payroll records where applicable, and documents supporting GST/HST collected or input tax credits claimed. Records must contain enough detail for the CRA to verify obligations and amounts.
A bank statement proves money moved; it may not explain the business purpose. An invoice total proves a customer was billed; it does not replace the purchase receipt for parts used on the job.
How long to keep records
The general CRA rule is six years from the end of the last tax year the record relates to. Important exceptions apply to late-filed returns, objections and appeals, unfiled GST/HST returns, and long-term property records. Some records may need to be retained indefinitely.
Where invoicing software fits
Handoff can organize customer records, quotes, invoices, tax lines, amounts billed, payment status, and exports. Those records support the sales side of bookkeeping. Handoff does not store every purchase receipt, reconcile the bank, classify capital property, determine deductibility, or prepare a tax return.
When the volume of transactions makes monthly reconciliation difficult, or when employees, GST/HST, assets, financing, or multiple provinces enter the picture, connect the invoice records to a fuller bookkeeping process.
Sources and official resources
- CRA: Business expenses
- CRA: Current or capital expenses
- CRA: Input tax credit records
- CRA: Record-retention rules
For the full overview, read Taxes for Canadian Sole Proprietors.