# Can I claim Staff Salaries and Wages as a business expense in Canada?

**Yes, fully claimable.** Fully deductible. Salaries, wages, bonuses, and reasonable allowances paid to employees for services rendered are deductible business expenses. The employer's share of CPP (5.95%) and EI (2.282% in 2026) are also deductible. Salaries paid to family members are deductible only if they are actually paid, necessary for the business and reasonable for the services performed.

Typical amount: Varies widely. For 2026, employer CPP (maximum CAD 4,230.45 per employee) plus employer EI (maximum CAD 1,572.30 per employee) adds approximately 8.23% on top of gross wages up to the CPP/EI ceilings.

## What Canada Revenue Agency (CRA) says

CRA allows deduction of salaries and wages under Section 9 of the Income Tax Act as expenses incurred to earn business income. The salary must be actually paid in the year (not accrued and unpaid at year-end for related persons). Salaries to family members must be reasonable and documented. Excessive salaries paid to owner-family members may be recharacterised.

## When you can claim

- Gross salaries and wages paid to arm's length employees
- Employer CPP contributions (5.95% on earnings between the CAD 3,500 basic exemption and the 2026 YMPE of CAD 74,600)
- Employer EI premiums (2.282% in 2026 outside Quebec, on maximum insurable earnings of CAD 68,900)
- Reasonable salaries paid to spouse or family members who genuinely work in the business, reported on a T4
- Payroll-related costs including workers compensation premiums and employer health tax

## When you cannot claim

- Salaries paid to family members that are unreasonably high for the work performed
- Dividends paid to shareholder-employees (dividends are not deductible; only genuine wages are)
- Owner's own drawings or distributions from an unincorporated business (these are profit, not a wage deduction)
- Salaries accrued but unpaid to related persons at the corporation's year-end (deductible only when paid)

## Good to know

**Pro tip:** When paying family members, document the services performed and benchmark the salary against what an arm's length person would be paid for the same role. Keep records of hours worked and tasks completed, plus a cancelled cheque or bank record of payment. CRA asks for proof that the salary was actually paid.

Source: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/business-expenses.html

## Related expenses

- [Professional and Legal Fees](https://accounts-os.com/ca/expenses/professional-fees-ca)
- [Business Travel](https://accounts-os.com/ca/expenses/travel-ca)
- [Business Insurance Premiums](https://accounts-os.com/ca/expenses/insurance-ca)