Who this is for
Sole proprietors, contractors, gig workers and owners of small corporations. The rules below apply to both, with the shareholder point applying only to corporations.
The five expenses
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Meals and entertainment: usually 50%. You can claim 50% of the lesser of what you paid and a reasonable amount. Coffee with a client, a working lunch, tickets to an event. There are exceptions. A business that sells food and drink to customers, like a restaurant, is not limited on the food it serves. Up to six staff events a year open to all employees at a location can be fully deducted. Long-haul truck drivers have a higher rate for meals on the road.
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Vehicle costs: the business share only. Fuel, insurance, repairs, lease or loan interest and depreciation are all claimable. But only in the proportion the vehicle was used for business, proven by a logbook. A vehicle used 60% for business gives a 60% claim. Our vehicle records guide lists what to keep.
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Home office: limited to business income. You can claim a share of rent or mortgage interest, utilities, insurance and property tax for a qualifying workspace. It must be your principal place of business, or used only for business and regularly to meet clients. The claim cannot create or increase a loss. Unused amounts carry forward.
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Equipment and improvements: over time, not at once. A computer, a machine, a vehicle, a renovation. These are capital costs, claimed through depreciation at set rates over several years. The 2026 proposal for immediate expensing may change this for property bought after September 15, 2026, but it is a proposal until passed. Our guide on the write-off proposal explains it.
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Personal costs paid by your corporation: a benefit, not a deduction. If the company pays for your personal phone, your family’s trip or your groceries, the value is a taxable benefit to you as shareholder. The corporation cannot deduct it. It is reported to you on a slip and taxed in your hands. Keep personal spending out of the company account.
One thing many people do not realize
Home office expenses cannot be used to create or increase a business loss. If your business made $3,000 and your home office share of costs is $5,000, you can claim $3,000 this year. The other $2,000 carries forward to a year with enough income. People who expect a home office to produce a refund are often surprised.
What to prepare
- Receipts sorted by type, with a note of the business purpose on anything that could be personal
- Your vehicle log and odometer readings
- The floor area of your home office and of your home
- A list of equipment bought in the year, with dates and prices
- For a corporation: a list of anything the company paid that was partly or wholly personal
When professional help may make sense
You claimed 100% of a mixed expense in past years. The company has been paying personal costs. A CRA letter has asked for receipts. Each is worth a conversation before the next return.
How Rex Tax may be able to help
We prepare self-employed and corporate returns and apply the limits correctly, so the claim holds up if it is reviewed. We also tell you what to keep so next year is quicker.
Official sources
- CRA: Line 8523, meals and entertainment
- CRA: Business-use-of-home expenses
- CRA: Benefits to shareholders
- CRA: Motor vehicle records
This guide is general information, not advice about your situation. It reflects the rules for the 2026 tax year. It has not yet been reviewed by a practitioner. The information was checked against the official sources listed above on the date shown. Rules change. Check the official sources above or ask us. How we prepare these guides.