Accounting and Legal Fees
When accounting, bookkeeping and legal fees are deductible, and how to split a mixed bill.
The short version
- Accounting, bookkeeping and legal fees for running the business are deductible on line 8860 of form T2125.
- That includes preparing the business part of your return, bookkeeping software and services, contract reviews, collecting unpaid accounts, and payroll services.
- Legal and other fees to buy a building, land or another business aren't current expenses; they're added to the cost of what you bought.
- Fees for preparing the personal part of your return aren't deductible. Fees to respond to a CRA review, or to object to or appeal an assessment, are deductible separately on line 23200.
- Incorporation costs are capital, not a current expense.
Accounting and Legal Fee Tax Deductions
A good accountant pays for themselves, and the tax system chips in: their fees for business work are deductible. The rules get finer when a bill covers both business and personal work, or when the legal work was for buying something. Here's how to split it.
What's Deductible on Line 8860
| Fee | Treatment |
|---|---|
| Bookkeeping services and software | Deductible |
| Accounting for the business: year-end, T2125, GST/HST returns, payroll | Deductible |
| Legal fees to draft or review contracts, collect accounts receivable, deal with employees | Deductible |
| Legal fees to defend the business in a lawsuit related to operations | Usually deductible |
| Preparing the personal part of your return | Not deductible (split the bill) |
| Legal fees to buy land, a building or another business | Added to the cost (capital) |
| Incorporation fees | Capital; not a current expense |
| Fees to object to or appeal a CRA assessment | Deductible on line 23200 (other deductions) of your return, not the T2125 |
Splitting a Mixed Bill
When one invoice covers your T2125 and your personal return, ask the accountant to split it, or split it reasonably yourself. A rough guide: if most of the work was the business statements and GST/HST, most of the fee is business. Keep the invoice with the split noted. See receipts to keep.
Which part of your professional fees is deductible?
Describe the bill: what the accountant or lawyer did for you. The assistant splits it into business, capital and personal, and tells you which line each part goes on.
Disputing a CRA Assessment
Professional fees to respond to a CRA review, or to prepare an objection or appeal against an assessment, are deductible, whether or not you win. They're claimed on line 23200 of your return. If CRA has reassessed you, start with notice of reassessment: what to do; the CRA objection SmartFile handles straightforward objections for far less than a professional fee.
Disagree with CRA? File the objection properly
The Objection Pack reads your notice, works out your deadline, drafts your statement of facts and fills in form T400A for you to sign.
When to Pay for Professional Help
- Your first year in business, to set up bookkeeping and the right GST/HST registration.
- When profits are high enough to consider incorporation; see small business taxes.
- A CRA audit or a large reassessment; see CRA tax problems.
- Buying or selling a business or business property.
Not sure what kind of help you need? Find the right tax help walks through it.
All the other expense lines are on business expense deductions and T2125 explained. Return Check is a lower-cost first look before you decide whether you need a full professional review.
Professional Fee Questions
Are accounting fees tax deductible for a small business?
Yes. Accounting and bookkeeping fees for the business are deductible on line 8860 of form T2125. Fees for preparing the personal part of your return are not.
Are legal fees deductible as a business expense?
Legal fees for running the business, such as contracts and collections, are deductible. Legal fees to buy capital property are added to its cost instead.
Can I deduct the cost of tax software for my business?
Yes, the business portion of bookkeeping and tax software is deductible.
Are fees to fight a CRA reassessment deductible?
Yes. Fees for help responding to a CRA review, or to object to or appeal an assessment, are deductible on line 23200 of your return.
Are incorporation costs deductible?
Not as a current expense. They are capital costs with their own tax treatment.
Sources: CRA, Expenses section of form T2125 (line 8860); Line 23200 Other deductions. Checked October 2026. Incorporation cost treatment is summarized.
Last reviewed October 4, 2026 against CRA and Government of Canada sources. How we check our facts.