Division C Deductions

Tax season for entrepreneurs with their own business can look different case by case. Whether you are a sole proprietor, or have incorporated your business, you will have to file the income/losses associated with your business for tax purposes. These articles will explain how you are taxed on your income from your business, which expenses are and are not deductible for tax purposes, and go a bit in depth on more specific topics.

Division C Deductions

After all your adjustments have been made to get from your accounting income to your net income for tax purposes, you can see if you are eligible for some specific deductions in getting to your taxable income. In terms of deductions that can relate to your business, there are the loss carry-overs of other tax years.

Net Capital LossesNon-Capital Losses
Capital losses that exceed capital gains in the year (and therefore can’t be used in the year) can be carried back 3 years and forward indefinitely.Business and property losses that exceeded the amount of income you made in the year can be carried back 3 years and forward 20 years.
These net capital losses you have can be used this year to the extent of the capital gains you have

If your capital gains are less than the net capital losses you have, you can use up to the capital gain amount and continue to carry the leftover loss to other years
These non-capital losses can be deducted against any income you make during the year (unlike net capital losses), but they cannot exceed the income you made in the year

Any leftover losses can continue to be carried to other years.  

After making all the deductions you are eligible for, you get to your taxable income. After that you will be taxed based on the income tax bracket you’re in and receive tax credits based on your eligibility. These topics will not be covered in this manual, as if you are a sole proprietorship they have to do more with you as an individual than your business.


Buckwold, William, et al. Canadian Income Taxation, 2021/2022. McGraw-Hill Education, 2021.

Wolfe, Kathy. 2022 CPA Competency Map Study Notes, 20th Edition. Densmore Consulting Services Incorporated, 2022.

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