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Self employed expenses are the costs you can subtract from your business income before you’re taxed on it. The CRA’s rule is that a current expense you incur to earn business income is generally deductible, as long as you claim only the business part. So $18,000 of real expenses on $90,000 of revenue cuts an Ontario freelancer’s tax and CPP bill by about $6,300.
Which self employed expenses can you deduct?
The expenses section of Form T2125 gives you the lines to work with. Most sole proprietors use a handful of them.
| Line | Expense |
|---|---|
| 8521 | Advertising |
| 8523 | Meals and entertainment (allowable part only) |
| 8690 | Insurance |
| 8710 | Interest and bank charges |
| 8760 | Business taxes, licences and memberships |
| 8810 / 8811 | Office expenses / office stationery and supplies |
| 8860 | Professional fees, such as legal and accounting |
| 8910 | Rent |
| 8960 | Repairs and maintenance |
| 9200 | Travel |
| 9220 | Utilities |
| 9281 | Motor vehicle expenses (not including CCA) |
| 9936 | Capital cost allowance (CCA) |
| 9945 | Business-use-of-home expenses |
Anything that doesn’t fit goes under “other expenses”. Don’t stretch a category to make a personal cost fit, because the form asks for the business part only. The CRA’s page on completing Form T2125 points to guide T4002 for the detail on each line.
What can’t you claim?
Personal costs, first. The CRA also says you can’t claim expenses you incur to buy capital property. A laptop, a piece of equipment or a vehicle you buy is capital, so you claim it over time through capital cost allowance instead of all at once. Ask before you write it off in one go.
The cost of goods or services that you or your family consumed isn’t deductible either. Buying groceries through the business account doesn’t turn them into supplies.
How much of your meals can you write off?
Half. The CRA’s line 8523 page caps what you can claim for food, beverages and entertainment at 50% of the eligible amount, and there are exceptions, such as a business that sells meals to customers. A $200 client dinner therefore gives you a $100 deduction at most. Not as generous as people assume. The same goes for the double-double you buy while you wait for a client: if it was a personal coffee, it’s a personal cost.
Can you deduct your home office?
Sometimes. The space has to be your principal place of business, or you have to use it only to earn business income and use it regularly to meet clients. If you just answer email at the kitchen table, that usually isn’t enough.
When it qualifies, you can claim a share of heating, home insurance, electricity, cleaning materials, property taxes, mortgage interest and CCA, or of your rent. A common method is workspace area divided by total area. Picture a 200 square foot office in a 2,000 square foot home: that’s 10%, so $3,000 of heat and hydro gives a $300 claim. There’s also a hard limit. The CRA says these expenses can’t be more than your net business income before you deduct them, so they can’t create or increase a loss.
What does $18,000 of expenses save you?
Take an Ontario freelancer with $90,000 of revenue. With no expenses, the self-employed tax calculator shows about $16,080 of income tax and $9,293 of CPP, so $25,373 together.
Now suppose $18,000 of the spending was genuine business cost. Net income falls to $72,000. Income tax drops to about $10,918 and CPP to $8,152, a total of $19,070. That’s $6,303 less, or 35 cents on every dollar spent. It’s why the marginal tax rate matters for spending decisions: the higher your income, the more each dollar of expense saves.
But a saving is still a cost. You spent $18,000 to keep $6,303. Never buy something just for the write-off.
This calculator takes net income, so subtract your expenses yourself first. It leaves out EI and GST/HST. If you owe more than the CRA’s instalment threshold, use the tax instalments calculator to plan your payments.
How should you keep track so tax time isn’t a scramble?
Photograph each receipt the day you get it and drop it in a folder named by month. Pay business costs from one account or card, so the statement does half the sorting for you. Then a quick monthly check, ten minutes, is enough. Hunting for a year of crumpled slips in March is how real deductions get missed.
The sources behind this page
The line numbers and the rules on capital property, personal costs and the business part come from the CRA‘s expenses section of Form T2125. The 50% meals limit comes from its line 8523 page, and the home office rules from its business-use-of-home page. Tax and CPP figures are from this site’s 2026 engine using CRA rates. The home office split and the 35 cents are our own arithmetic. Keep your receipts, and check the CRA pages before you file, as they can change.
Frequently asked questions
What expenses can a self-employed person deduct?
Generally any reasonable current expense you incur to earn business income, listed on the expenses section of Form T2125, and only the business part.
Can I deduct a computer or vehicle I buy?
Those are capital property. The CRA says you can't claim the cost to buy capital property as an expense, but you may claim capital cost allowance on it.
How much of my meals can I claim?
The CRA's line 8523 page caps food, beverages and entertainment at 50%, with a few exceptions such as a business that sells meals to customers.
Can my home office create a loss?
No. The CRA says business-use-of-home expenses can't exceed your net business income before you deduct them, so they can't create or increase a loss.
Do I still pay CPP on income after expenses?
Yes. You pay CPP on net business income, and expenses lower that figure. Our calculator shows both halves of CPP.
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST