After 7 parts explaining what you can deduct — let’s end with what gets Canadian business owners in trouble.

The CRA doesn’t go looking for tiny slip-ups.
They go after patterns — especially expenses that are:

• personal in disguise
• unsupported by documentation
• inconsistent with business activity

Here are the top 10 expense mistakes we fix regularly — and how to avoid them permanently.

1. Claiming Vehicle Expenses Without a Mileage Log

This is the #1 audit trigger.
If you can’t prove business KM, CRA can deny the full deduction — even fuel.

Fix: Track every business trip. Use MileIQ or QBO’s built-in tracker.

2. Writing Off Personal Groceries as “Meals”

Meals are only deductible (50%) when there is a real business meeting.

Coffee alone = personal.
Coffee with a client = deductible.

Fix: Write who you met and why. Every time.

3. Expensing Inventory Immediately

Inventory is an asset until sold.
Deduct only through COGS — not when purchased.

Fix: Do year-end inventory counts and track cost per unit.

4. Deducting 100% of Mixed-Use Items (Phones, Internet, Vehicles)

If you use it personally at all, you must prorate.

Fix: Choose a reasonable percentage. Document the basis.

5. Not Documenting Travel Purpose

“Business trip” isn’t enough. CRA wants proof.

Fix: Save itineraries, meeting schedules, receipts, and notes.

6. Home Office Deductions That Aren’t Exclusive Use

You can’t write off your kitchen table just because you sometimes open your laptop there.

Fix: Use a clearly defined workspace. Measure and document square footage.

7. Ignoring the “No Loss” Rule for Home Office

You can’t make or increase a business loss using home office deductions.

Fix: Carry forward unused portions to future profitable years.

8. Claiming Clothing That’s Not Safety or Uniform

Just because you only wear it for work doesn’t mean it’s deductible.

Eligible:

• Safety boots
• Hi-vis and PPE
• Branded uniforms

Not eligible:

• Regular clothing
• Athletic wear
• Clothing without logos

9. No Receipts — Only Bank Statements

A bank record shows payment, not purpose.
CRA disallows anything without a true receipt.

Fix: Store digital copies — attach to transactions in QBO.

10. Not Adjusting for Personal Use of Assets

If you buy something big and use it personally (like a truck or a powerful laptop), you must allocate fairly.

Fix: Be honest and reasonable — CRA respects transparency.

The Castle Difference: All Risk Removed

When Castle manages your bookkeeping:

✔ every expense has supporting documentation
✔ percentages are tracked and defensible
✔ inventory and COGS are accurate year-round
✔ vehicle logs are maintained
✔ home office is calculated correctly
✔ your tax return is backed by airtight records

No stress. No guesswork.
If CRA ever calls, we have everything ready — organized, labeled, and bulletproof.

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