Can I deduct start-up costs before my business makes its first sale?

Arsen Accounting Services · Question 133 · Sources checked October 29, 2026

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Possibly. The first sale is useful evidence, but it is not the only event that determines when a business begins. CRA asks whether the business had actually commenced when expenses were incurred, rather than treating every preliminary idea or investigation as an operating business.

Establish the start date from the facts

Costs incurred while actively setting up operations may need different treatment from costs of exploring whether to start at all. Identify the activities completed, the services or goods offered, and the point at which the venture was being carried on.

Then classify the expenditure. Equipment or other enduring assets are not necessarily ordinary operating expenses. A business start date does not turn every acquisition into an immediate deduction, and personal costs remain separate.

Official guidance: [1].

Build a useful timeline

For example, record when you signed a commercial lease, obtained required licences, purchased equipment, launched sales activity, accepted orders, and completed the first job. That is more informative than choosing January 1 because it is easy to enter in software.

Assemble a start-up file

• A dated summary of steps taken to begin operations.
• Contracts, licences, registrations, and first customer records.
• Invoices separated into operating costs and assets.
• Notes identifying research costs and personal spending.

Ask your preparer to review borderline items and document the basis for the starting date. If expenses span two tax years, preserve both years' records instead of moving all costs into the year of the first invoice. Early organization makes later bookkeeping and asset schedules much easier to maintain.