I'm self-employed — which business expenses does CRA commonly challenge in audits?

CRA auditors pay close attention to expense categories where personal and business use overlap. The most commonly challenged deductions for self-employed Ontarians include home-office expenses (the area must be used exclusively and regularly for business), vehicle expenses (a logbook is essential — CRA expects a record of business trips including date, destination, and purpose), meals and entertainment (only 50% is generally deductible and receipts must identify who was present and the business purpose), and travel expenses claimed without adequate documentation.

Business owners who pay family members as employees are also scrutinized to confirm the wages are reasonable for the services actually provided. Capital cost allowance claims on assets that are partly personal, and deductions for membership dues in clubs considered recreational, are other common targets.

The practical defence for all of these is contemporaneous records — logs kept at the time, not reconstructed later. Digital apps that track mileage and store photo receipts are widely accepted by CRA. If you are audited, producing a clear logbook and business purpose for each expense is far more effective than arguing general reasonableness without documentation.