Many small business people use the term tax deduction as a synonym for a legitimate business expense. That is, a tax deduction is an expense that can deducted from their business's income when their income tax is calculated that particular year. As a rule, says the Canada Revenue Agency (CRA), "you can deduct any reasonable expense you incur to earn business income".
You may not be able to use the entire amount of a business expense as a tax deduction, though. My Business Expenses as Tax Deductions Index provides explanations of the tax deduction rules for many common business expenses.
There are also tax deductions that relate specifically to small business, such as the Small Business Tax Deduction, which gives Canadian-controlled private corporations a lower tax rate than they would otherwise have. This small business tax deduction is applied as an annual tax credit of at least 16 percent. (Refer to the CRA's bulletin IT73R6 - The Small Business Deduction for more details about this potential tax deduction.)
And there are tax credit programs especially for business, such as the Scientific Research and Experimental Development Program (SR&ED), that can also provide businesses that qualify with tax deductions.
And any business can take advantage of tax strategies to maximize their potential tax deductions, such as maximizing their Capital Cost Allowance claim. See this page of 8 Tax Strategies to Maximize Your Business Income Tax Deductions, for instance.
