Business Expenses: A Mission (Im)Possible Guide for Canadian Sole Props and Small Corps

By Your Friendly Neighbourhood CPA—armed with the Income Tax Act, a label-maker, and a half-serious fear of paper cuts.

Prologue: Popcorn, Exploding Glasses, and…Receipts?

Last weekend my child and I devoured every Mission: Impossible film back-to-back—six hours of face-swapping masks, motorcycles flying through fireballs, and one very stressed-out Tom Cruise dangling from increasingly taller buildings. Somewhere between the second bowl of popcorn and Ethan Hunt’s fourth “impossible” escape, my kid asked, “Do you ever do stuff that crazy at work?”

Well… no. But convincing entrepreneurs that not every crumpled shoe-box receipt is a deductible expense can feel like defusing a briefcase nuke with seconds to spare. So, in honour of our movie marathon, here’s your CPA-approved survival guide to business expenses, served with a splash of IMF-style theatrics.

1 — “Your mission, should you choose to accept it…”

Picture a gravelly voice in your inbox at year-end:

IMF Accounting Division: “Good morning, entrepreneur. Your mission, should you choose to accept it, is to separate legitimate business expenses from personal indulgences before the CRA arrives. As always, if you’re audited, we will disavow any knowledge of that shoe box.”

Paragraph 18(1)(a) of the Income Tax Act plays the stern IMF Director here: an expense must be incurred to earn income and be reasonable in amount. Anything else? “This receipt will self-destruct in five seconds.”

2 — Current vs. Capital: Choose Your Gadget Wisely

In every film, Ethan Hunt grabs a mix of disposable gizmos (single-use masks) and heavy hardware (helicopters). The tax code sees expenses the same way:

IMF Gear	Accounting Twin	Tax Treatment
Adhesive face mask—one heist, then toast	Printer ink, Facebook ads	Current expense – deduct 100% this year
BMW motorbike that survives three sequels	Delivery van, studio reno	Capital expense – write off slowly with CCA

If the item keeps working long after the popcorn’s gone, it belongs in the capital camp. Your café latte? One-and-done. Your new espresso machine that will outlive a tortoise? Capital asset (cue theme music).

3 — Field Guide to Deductible Debriefs

Home-Office Hideout

Carve out the square footage used solely for business ops—Hunt’s gadget basement, minus the C-4. Apply that slice to heat, electricity, insurance, and (if you’re self-employed) mortgage interest. Your entire condo is not “mission control”.

Vehicle Chase Scenes

Fuel, insurance, repairs, lease or CCA: claim only the business kilometres. No logbook? That deduction will self-destruct at audit.

Meals & “Dead-Drops”

Fifty per cent deductible. Whether you share sushi with a client or inhale drive-through on a road trip, the CRA demands proof the rendezvous had a revenue motive. Solo midnight pizza? Nice stunt, no write-off.

Interest & Bank Charges—The Safecracker’s Kit

Borrowed funds that earn income = deductible interest. Borrowing for a jet-ski named IMF HQ? The CRA hits the red button.

Salaries & Sub-contractors

Your crack team of designers, plumbers, or code ninjas doesn’t work for free. Their wages, CPP/EI, and that 3 a.m. coffee run? All deductible intel.

4 — When the Mask Slips: Expenses the CRA Will Disavow

1. Personal luxuries—Netflix, dog yoga, rhinestone collars. Ethan Hunt has cool toys; you still can’t deduct your PS5.

   
   

2. Fines & penalties—Speeding on the way to a client? That ticket’s not a “business cost”, it’s evidence you need a better escape route.

   
   

3. Golf clubs & yacht dues—The Act targets recreation clubs like a laser-guided drone. “Networking” is not a magic word.

   
   

4. Life-insurance premiums—Unless a lender is beneficiary, the CRA sees that as personal Kevlar.

   
   

5. Renovations disguised as “repairs”—Replacing shingles with a steel roof? Nice fortress; start the CCA countdown.

   
   

5 — Sole Prop vs. Incorporated: Same Mission, Different Cover Story

Sole proprietors report on the T2125; corporations file a T2. The filing badge changes, but the rules are identical: expenses must be ordinary, reasonable, and tied to profit. If your corporation pays personal costs, shareholder-loan booby-traps await (cue the fuse-hissing sound effect).

6 — Tales from the IMF (Income & Money Fumbles)Lauren the Freelance Designer

Hands over receipts for printer ink (green light), dog sweaters (red light), and a “creative retreat” to Tofino “for inspiration” (explosive zone; no clients, no conference, no deduction). Outcome: 60% of deductions survive.

Malik the Incorporated Contractor

Claimed the entire pickup-truck payment but tracked zero kilometres. Auditor asks for a log; Malik produces a calendar with “client stuff” scrawled in June. Result: most of the vehicle claim tossed, plus interest and penalties.

Olivia the Etsy Artisan

Uses a corner of the basement as a studio, measures it (12%), applies that slice to utilities, insurance, and, oops, also tried to claim her entire house-cleaning bill. CRA allows the 12% share only—mission partially accomplished.

7 — “This tape will not self-destruct in six years”

Keep every receipt (digital copies count) for at least six years after the tax year—longer than the gap between some Mission sequels, but it beats scrambling when the CRA calls. Label transfers “Personal ↔ Business” like Ethan labels explosives. File logically: Advertising, Meals (50%), Supplies, Capital Assets. Future-you, and your accountant, won’t need night-vision goggles to decode your books.

8 — Final Briefing

Claiming expenses is less about spy-level creativity and more about credibility. Stick to costs that clearly advance the business mission, keep impeccable records, and you’ll exit the tax-season helicopter with your deductions intact (theme music triumphantly blaring).

And remember: if you try to claim your pet goldfish as a “security consultant”, the CRA will disavow you faster than you can say “Good luck, Mr Hunt”.

Think your expenses can withstand a CRA mission?

Don’t wait for the audit chase—book a clarity call with Anker RETax 

today and gain peace of mind from real pros (no disguises required).

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Disclaimer: This message will not self-destruct, but it also isn’t personalised tax advice. Consult a qualified CPA before your next high-wire deduction.

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