Can I deduct a customer invoice that will never be paid?
When Can an Unpaid Invoice Become a Bad Debt?. Understand the Canadian tax rules, records to gather and practical next steps before preparing your return.
Request a quote →Arsen Accounting Services · Prepared October 29, 2026
Self-employed expenses: 10 questions before filing · Browse the 100-article collection
The direct answer
A business bad-debt deduction generally requires the receivable to have been included in income and to have become a bad debt in the year claimed. A merely late payment is not automatically uncollectible. Keep the invoice and evidence supporting the conclusion, such as collection correspondence or insolvency information. Treat any later recovery consistently with the tax rules.
Separate lateness from uncollectibility
An invoice being overdue does not, by itself, explain why it is a bad debt. Record the payment terms, collection attempts, disputes and information about the customer's ability to pay. Provide the history without overstating what is known. A preparer needs to assess the particular debt and year rather than apply an automatic rule to every old invoice.
Keep recoveries connected to the original claim
If money is later collected, identify the invoice and any earlier write-off. Do not record a recovery as an unexplained deposit or forget that an earlier deduction may have been taken. Keeping a debt schedule also helps ensure that the same invoice is not written off again when a new preparer receives the records.
What to gather before the review
- Original invoice and evidence of prior income reporting
- Collection history and relevant correspondence
- Write-off schedules and later recoveries
Is there a fixed number of overdue days that guarantees a deduction?
No simple ageing label establishes the result. The circumstances and applicable requirements must support the treatment. Bring the facts behind the outstanding amount, not only an accounts-receivable ageing report.
Your next step
Separate genuinely uncollectible balances from overdue accounts that are still being pursued.
Related reading
Official sources
Self-employed Business, Professional, Commission, Farming, and Fishing Income: Chapter 3 – Expenses
Sources checked for this collection on October 28–29, 2026. Annual forms may refer to a specific tax year. Use the rules and limits for the year being filed. General information; eligibility, elections and deadlines depend on the facts. No deduction or tax saving is guaranteed.
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