Construction business expenses in Canada: the complete guide for contractors and trades

A Canadian construction business has no withholding scheme on its subcontractors, but it does have a reporting one: the T5018, which makes every payment to a subbie a line on an information return. Around that sit the rules that shape a contractor’s books every month: input tax credits on materials and equipment, capital cost allowance classes that decide how fast a tool or truck is written off, CPP and EI on every employee hour, the 50% limit on client meals, and provincial workers’ compensation and sales tax layered on top. This guide goes through the whole ledger of a Canadian contractor or trade business, category by category, with a verdict for each one before the detail. Every figure is sourced to the Canada Revenue Agency in the Sources section, retrieved 10 October 2026.

What this guide covers: materials and supplies, subcontractors and the T5018, tools and capital cost allowance, heavy equipment and trucks, vehicle running costs, wages, CPP and EI, protective gear and workwear, repairs and maintenance, insurance, licences and dues, meals and the 50% rule, GST/HST, and the records and year-end work that tie it together.

The construction ledger at a glance

The rest of this guide walks through each row, and every section opens with its verdict.

Where ExpenseFlow fits

The contractor’s purchase ledger is supplier invoices from lumber yards and electrical wholesalers, fuel cards, rental yards and subbie invoices, across several jobs at once. ExpenseFlow captures each document (email forward, upload or phone), reads the line items and the GST, HST, PST or QST per line, codes each line to your chart of accounts with a written reason, and routes anything uncertain to a person before it posts. Its Canadian construction checks are built from the rules on this page: a vehicle purchase is flagged for Class 10 capital cost allowance rather than an expense, a tool is flagged against the Class 12 small-tool line, the line-level tax is recomputed against the totals, and mixed rates on one document are flagged. Because subbie bills post against a contact, the year’s payments per subcontractor are a report rather than a search when the T5018 is due. After approval the bill syncs to Xero with the source document attached, or to QuickBooks Online as a coded bill.

What it does not do: it does not prepare or file the T5018, calculate CCA, run payroll or file your GST/HST or provincial sales tax returns. The construction charts of accounts for Ontario, Alberta, British Columbia and Quebec line up with the categories below.

The ExpenseFlow for construction and trade businesses page covers these checks across all five countries.

Materials and supplies

You can deduct any reasonable current expense you incur to earn income ^[1] , which covers lumber, drywall, fasteners, wire, pipe and the consumables a job uses up, and the cost of items the business uses indirectly to provide goods or services is a deductible supply ^[1] . The GST/HST on them is claimable as an input tax credit to the extent the purchase is used in your commercial activities and is reasonable in quality, nature and cost ^[2] . Delivery and freight charges on materials are deductible too ^[1] .

Subcontractors and the T5018

You must issue T5018 slips or a listing if your primary source of business income is more than 50% from construction activities, you made payments to Canadian resident subcontractors for construction services performed inside or outside Canada, and the total paid to a subcontractor in the calendar year was more than $500, not including GST/HST ^[3] . Amounts are reported for the year in which they are paid ^[3] . Collect the subcontractor’s legal name, address and business number or SIN when you first engage them, not in the week the slips are due. Whether a long-term labour-only subcontractor is really an employee for CPP, EI and income tax is a separate status question; the ledger should reflect the answer.

Tools and capital cost allowance

Class 12 includes tools, medical or dental instruments and kitchen utensils that cost less than $500, at a 100% rate ^[4] , so a $350 circular saw is written off in the year. Class 8, at 20%, takes property not included in another class ^[4] , which is where a $2,500 table saw, a generator or a compressor sits. Class 50, at 55%, takes general-purpose electronic data processing equipment such as laptops and tablets ^[4] . The first-year and accelerated investment rules change the timing of the first claim; the equipment and tools guides set them out.

Heavy equipment, trucks and vehicles

Class 10, with a CCA rate of 30%, includes motor vehicles and some passenger vehicles ^[4] . Fuel, maintenance, insurance and licence costs are deductible at the business-use share, and the ITC follows the same share ^[2] . Keep a log of business kilometres; a truck that is also the family vehicle needs one to support the split. The vehicle, mileage and fuel guides carry the method and the CRA’s prescribed rates.

Wages, CPP and EI

You can deduct gross salaries and other benefits you pay to employees ^[1] . In 2026 the CPP rate is 5.95% for both employer and employee on earnings between the $3,500 basic exemption and $74,600 ^[5] . The EI rate is 1.63% of insurable earnings for the employee, up to $68,900, with the employer paying 1.4 times that, a maximum of $1,572.30 per employee; Quebec’s employee rate is 1.30% ^[6] . Provincial workers’ compensation premiums, which are high for construction classifications, and provincial employer health taxes sit on top; your province’s board is the authority.

Protective gear, workwear and small supplies

Hard hats, safety boots, high-visibility vests, gloves and fall-arrest gear the business supplies are items used indirectly to provide your services, deductible as supplies ^[1] , and their GST/HST is claimable ^[2] .

Repairs and maintenance

You can deduct the cost of labour and materials for any minor repairs or maintenance done to property, but not the value of your own labour, and not repairs that are capital in nature ^[1] . Replacing a worn blade or servicing a compactor is a repair; rebuilding a used skid steer you just bought is capital.

Insurance, licences, dues and fines

You can deduct ordinary commercial insurance premiums on buildings, machinery and equipment, annual licence fees and some business taxes, and annual dues to keep your membership in a trade or commercial association ^[1] . Club dues are not deductible where the club’s main purpose is dining, recreation or sports ^[1] . Building permits pulled for a job are a cost of that job.

Meals and the 50% rule

Food, beverages and entertainment are limited to 50% of the lesser of the amount incurred and a reasonable amount ^[7] . The limit does not apply to an event to which all employees at a location are invited, up to six a year, or to meals at a temporary work camp built to provide meals and accommodation where the employee cannot reasonably return home each day ^[7] . The business meals guide has worked examples.

GST/HST

You stop being a small supplier when your taxable revenue goes over $30,000 in a single calendar quarter or over the last four consecutive quarters, and you have 29 days from the effective date to register ^[8] . ITCs are claimed only to the extent purchases are used in commercial activities ^[2] . The GST/HST guide has the provincial rates, the HST calculator works a figure either way, and the GST/HST return guide covers the filing.

Records and year end

Records are kept for six years, as the record-keeping guide sets out. The tax deadlines calendar has the T5018, T4, payroll remittance and GST/HST dates, and the year-end checklist walks the close, including the CCA additions for the year.

Common mistakes

• Missing T5018 slips for subcontractors paid more than $500 ^[3] .
• Expensing a $1,300 table saw instead of adding it to Class 8 ^[4] .
• Putting a $350 tool in Class 8 when it qualifies for Class 12 at 100% ^[4] .
• Claiming ITCs on the private share of a truck ^[2] .
• Deducting the value of your own labour on repairs ^[1] .
• Deducting golf club dues as business development ^[1] .
• Claiming 100% of client meals ^[7] .
• Missing the $30,000 small supplier threshold ^[8] .