Write off uncollectable invoices — but only if you already reported the income.
Know exactly what belongs on Line 8590 — and what the CRA says doesn't qualify.
Special CRA rules and percentage limits that apply to bad debts.
You can only deduct a bad debt if the amount was previously included in your business income. If you never reported it as revenue, you cannot claim it as a bad debt.
Section 20(1)(p) of the Income Tax ActIf you deducted a bad debt and later recover all or part of it, you must include the recovered amount in your income for the year you receive it.
See how different professionals use Line 8590 deductions in practice.
Invoiced a client for a completed software project, but the client ceased operations and the invoice remains unpaid after 6 months of collection attempts.
$3,500
$3,500 (100%)
Invoiced a client for a wedding photography deposit that was never paid despite multiple follow-ups and the event was cancelled.
$1,200
$1,200 (100%)
These errors on Line 8590 can trigger a CRA review — here's how to get it right.
Claiming amounts never reported as income
A bad debt deduction is only available for amounts you previously included in income. If the amount was never invoiced or reported as revenue, it cannot be written off as a bad debt.
Forgetting to report recovered bad debts as income
If you later collect on a debt you previously wrote off, you must include that recovered amount in your income for the year of recovery.
These categories are often mixed up with Bad Debts. Here's the difference.
See how ScanForTax processes a typical bad debts expense.
Internal Write-Off Document
2025-06-15
Ontario
ScanForTax flags this internal write-off and confirms the original invoice was previously recorded as income. The full $3,500.00 is deductible on Line 8590 as a bad debt.
Profession-specific guides that frequently use Bad Debts deductions.
See how tax recovery works for bad debts expenses in each province.
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