What expenses can a subcontractor claim in Canada?

Common potentially deductible expenses

Tools, materials and supplies used in the work.

Business insurance, licences, professional dues and certain banking costs.

Telephone and internet based on the business-use portion.

Advertising, software, bookkeeping and legal or accounting fees related to the business.

Wages paid to employees and legitimate payments to other subcontractors, with proper documentation.

Vehicle expenses and mileage

Vehicle costs may include fuel, insurance, repairs, maintenance, eligible interest or leasing costs, but only to the permitted business-use extent.

Keep a mileage log showing the date, destination, business purpose and distance of each business trip. Normal travel from home to a regular work location may be personal commuting; the particular facts matter.

Record total annual kilometres so the business-use percentage can be calculated.

Meals, entertainment and workspace in the home

In many situations only part of business meals and entertainment is deductible, and a clear business purpose must exist.

Workspace-in-the-home expenses have specific conditions. Eligible costs are allocated on a reasonable basis such as area and time used.

A home-office claim cannot generally create or increase a business loss, although unused amounts may carry forward when the requirements are met.

Large purchases may not be an immediate expense

Equipment, computers, machinery and tools that provide a lasting benefit may be capital property. They are generally claimed through Capital Cost Allowance rather than deducted in full immediately.

The asset class, purchase timing and personal use can affect the result.

Records to keep

Invoices and receipts showing date, supplier, description and tax.

Bank and credit-card statements as supporting evidence, not an automatic replacement for receipts.

Customer invoices, contracts, T4A or T5018 slips and deposit records.

Mileage log, work calendar and calculations for mixed-use expenses.

Tax records for at least six years from the end of the last tax year they relate to, unless CRA instructs otherwise.