Taking tax deductions can help you avoid overpaying your taxes and use tax incentives available to Canadians focused on small businesses. If you are a freelancer, gig worker, consultant, or run a small company, you can claim many business-related costs, as long as the Canada Revenue Agency accepts them.
The guide explains the main tax deductions you can take if you are self-employed in Canada.
1. Home Office Expenses
One of the most popular tax deductions for self-employed Canada residents is the business-use-of-home expense. To qualify, your home office must either be your principal place of business or a space used exclusively for earning business income and regularly meeting clients.
Eligible deductions include:
- A portion of rent or mortgage interest
- Utilities (heat, electricity, water)
- Property taxes
- Home insurance
- Maintenance and repairs
Calculate your deduction based on the percentage of your home used for business (e.g., square footage). Keep detailed records, including floor plans, utility bills, and mortgage or lease documents.
2. Vehicle Expenses
If you use your vehicle for business, you can claim a percentage of your vehicle expenses based on how much you drive for work versus personal use. This is one of the most frequently claimed tax write-offs for independent contractors.
Deductible vehicle costs include
- Fuel
- Repairs and maintenance
- Insurance
- Licensing and registration fees
- Leasing or loan interest (subject to CRA limits)
To support your claim, maintain a detailed mileage logbook throughout the year and keep all related receipts. The CRA does not allow flat-rate per-kilometre deductions for self-employed individuals, so precise tracking is essential.
3. Office Supplies and Expenses
Every day, office expenses can be deducted fully if they’re used to earn income. These include:
- Stationery (pens, paper, envelopes)
- Printer ink
- Postage and courier services
- Small tools or tech accessories (e.g., USBs, chargers)
Note that larger purchases, such as computers or furniture, are considered capital assets and must be claimed through Capital Cost Allowance (CCA).
4. Business Travel
Travel costs incurred to earn business income are deductible. This includes expenses related to:
- Transportation (airfare, taxis, car rentals)
- Accommodation
- Meals (subject to the 50% limit)
- Conference or training fees
Be prepared to separate business and personal travel. Only the portion related to business activities is deductible. Always document the purpose of your trip, keep receipts, and record all travel dates and destinations.
5. Meals and Entertainment
You can deduct 50% of eligible meals and entertainment expenses incurred to earn business income. This includes:
- Client lunches and dinners
- Meals while traveling on business
- Event tickets for client appreciation
This is one of the most common independent contractor deductions. Keep original receipts (not just credit card slips), and note the attendees and business purpose on the back. CRA audits often scrutinize these expenses, so detailed records are critical.
6. Professional Services
If you hire professionals to support your business, their fees are deductible. This includes:
- Accounting and bookkeeping services
- Legal services (contracts, consultations)
- Consulting and IT support
Fees related to business operations are fully deductible. However, legal or accounting fees related to capital acquisitions must be added to the cost of the asset.
7. Business Insurance
Premiums paid for business liability insurance, errors and omissions coverage, or commercial property insurance are deductible. If you use your home for business and have increased your home insurance accordingly, a portion of those premiums may also be claimed.
8. Marketing and Advertising
Promoting your business? You can deduct:
- Online and print advertising
- Business cards
- Website hosting and domain fees
- Social media advertising (e.g., Facebook or Google ads)
These costs fall under business expenses self-employed CRA categories and can reduce your taxable income when properly documented.
9. Utilities and Communications
For those with a dedicated business line or who operate from a commercial space, you can claim:
- Internet fees
- Cell phone bills (business use portion)
- Landline phone bills
- Electricity, heating, and water (for separate business premises)
If you work from home, these expenses must be claimed as part of your home office deduction and not separately.
10. Training and Professional Development
Courses, seminars, and workshops related to your existing business activities can be deducted. This includes:
- Online courses for skill development
- Conference fees
- Trade publications and memberships
The training must be relevant to your current business (not a new career path) to be eligible.
11. Bank Fees and Interest
Deduct:
- Business bank account fees
- Payment processing charges (e.g., Stripe, PayPal)
- Interest on business loans or credit lines
For financed equipment or business vehicles, only the interest portion (not principal) is deductible, and CRA limits may apply.
CRA Compliance and Recordkeeping Tips
Claiming self-employed tax deductions Canada requires careful documentation and awareness of CRA standards:
- Save all original receipts and categorize expenses by type
- Track mixed-use items (e.g., phone, car) and allocate the business portion only
- Use accounting software or a dedicated business account to simplify records
- Retain your records for at least six years in case of a CRA audit
How MyBooks Can Simplify Tax Time for the Self-Employed
Managing self-employed tax deductions in Canada doesn’t have to be overwhelming—especially with the right tools. MyBooks Accounting offers a powerful, cloud-based accounting solution designed specifically for freelancers, contractors, and small business owners. Whether you’re tracking expenses, managing invoices, or preparing reports for your tax return, MyBooks can help simplify every step of the process.
Key features include:
- Real-time expense tracking: Categorize deductible expenses like travel, vehicle costs, home office usage, and more.
- Automated bank feeds: Connect your bank account to eliminate manual entry and reduce errors.
- Audit-ready reporting: Generate professional, CRA-compliant reports to support your Form T2125 claims.
- Mobile-friendly access: Manage your finances on-the-go, whether you’re meeting clients or working from home.
Plus, MyBooks also provides professional bookkeeping clean-up and catch-up services, and tech advisory services for those who prefer a more hands-off experience. It’s a one-stop shop for self-employed professionals who want to stay organized, compliant, and profitable.
Tax Tips for Self-Employed Canadians
- File Form T2125 with your tax return to report business income and deductions.
- GST/HST registrants should deduct only the net (pre-tax) expense amount if they claim input tax credits.
- Don’t claim personal expenses. If something is shared (like a cell phone), only the business-use portion is deductible.
Final Tips
Understanding tax write-offs, independent contractor rules, and applying them correctly can save you thousands in taxes annually. With proper documentation and CRA-compliant practices, these deductions empower self-employed Canadians to keep more of what they earn.
To stay organized year-round and simplify your tax filing process, consider using a tool like MyBooks Accounting. It helps track business expenses, generate reports, and stay audit-ready with CRA-compliant recordkeeping, making it a valuable companion for freelancers and independent contractors alike.
Frequently Asked Questions
Are home office expenses tax deductible in Canada?
Yes. If your home office is your primary place of business or used exclusively to earn income and regularly meet clients, you can deduct a portion of your rent or mortgage interest, utilities, insurance, and more.
Can I claim my car expenses as a self-employed Canadian?
Yes, if you use your car for business. Track total and business kilometres and deduct a portion of your vehicle expenses (gas, insurance, maintenance, etc.) based on business use.
How much of my phone bill can I write off as self-employed?
You can claim the business-use percentage of your phone bill. For example, if 60% of your phone use is for business, you can deduct 60% of the bill. Keep usage records to justify your claim.
What is the maximum deduction for self-employed?
There is no fixed maximum. You can deduct any reasonable expense that was incurred to earn business income, as long as it meets CRA guidelines and is properly documented.How do I get the biggest tax refund when self-employed?
Maximize your refund by claiming all eligible deductions, keeping organized records, and filing accurately. Using software like MyBooks can help track expenses efficiently and ensure you don’t miss valuable write-offs.
