Updated Checked by the Tax-Services.ca editorial team How we check
Most e-commerce expenses you pay to earn income are deductible: advertising, shipping and freight, bank and payment charges, office costs, professional fees, rent, utilities and wages. Meals are capped at 50%, and some things never qualify, like your own pay as owner or the price of equipment you’ll use for years. The CRA’s guide for self-employed business income sets all of that out.
The easy mistake? Underclaiming. Online sellers lose small receipts across a dozen apps and cards, and each lost receipt is tax you paid for nothing.
Which e-commerce expenses can you deduct?
Chapter 3 of the CRA’s Guide T4002 lists expenses by type, each tied to a line on the T2125 form. The ones an online shop meets most often are below.
| Expense | What the CRA guide says |
|---|---|
| Advertising | Deductible, with limits on some foreign periodicals |
| Delivery and freight | Shipping costs are deductible |
| Interest and bank charges | Business loan interest and bank charges; not personal loans |
| Office expenses | Small items such as paper and stamps; not capital items |
| Professional fees | Accounting and legal fees for advice and record keeping |
| Rent, utilities, phone | Business use; not the basic home phone rate |
| Salaries and wages | Employees, not owner drawings |
| Meals and entertainment | 50% of the lesser of what you spent and a reasonable amount |
| Licences, dues, taxes | Annual licence fees and trade association dues |
Selling costs that hit your product directly, such as the stock you resell, go through cost of goods sold rather than this list. If you carry stock, a good year-end count matters as much as any receipt. The CRA’s own business expenses page frames the test simply: a business expense is a cost you incur for the sole purpose of earning business income.
What about home office and vehicle costs?
The guide says you claim business-use-of-home expenses on their own line, and you must split them in proportion to business use. So a spare room that holds stock and a desk is partly a business cost. A kitchen table you also eat at is a harder argument. Work out the share. Write down how you did it. Keep the bills.
Here’s the idea with made-up numbers. Suppose your home costs $12,000 a year for the eligible items, and the room you use only for the shop is 10% of the floor area. The share to work from is 10%, or $1,200. The real calculation has more rules, so read the guide before you claim.
Vehicle costs also work by share. You deduct the business-use part of operating costs and you must keep kilometre records. The guide puts limits on passenger vehicle interest and leasing. I didn’t confirm the current dollar limits, so look them up on the CRA’s page before you claim.
What can’t you deduct?
The guide is clear on several items. You can’t deduct your own salary or drawings, the value of your own labour, personal expenses, fines and penalties, tax penalties and interest, or charitable donations and political contributions as business expenses. Personal consumption of your own goods doesn’t count either.
Capital items trip people up. A laptop, a label printer or a camera used for years is capital property. You don’t deduct the whole price. You claim it over time through capital cost allowance, and I haven’t covered the classes or rates here. Check the CRA’s CCA pages for the class and rate.
The guide adds that you reduce an expense by any GST/HST input tax credit you claim on it. If you’re registered, deduct the price without the tax you get back.
How much does a missed expense cost?
Say your online shop has $90,000 of sales and $30,000 of expenses, so $60,000 of net business income. In Ontario, this site’s self-employed tax calculator shows $14,603 of income tax plus CPP. Now suppose you forgot $10,000 of shipping and ad costs. Claiming them drops net income to $50,000, and the total falls to $11,495, a difference of $3,108.
That’s real money, and it comes from receipts you already had sitting in an inbox somewhere, which is why a monthly ten-minute sort pays for itself many times over. The calculator leaves out GST/HST, EI and the expenses themselves, and it covers one province. Treat it as a guide to the size of the effect.
Want to see whether a product still earns its keep after costs? The profit margin calculator shows margin and markup, and the ROI calculator works out payback on an ad spend. If you incorporate, the corporate tax calculator gives the tax on what’s left. Its Ontario small-business rate for 2026 is a derived blend, so read the notes.
How do you keep records that stand up?
Keep the receipt, the date, what it was for and who you paid. For card and app charges, the statement isn’t enough on its own if it doesn’t say what you bought. I didn’t find a single CRA rule about the format of e-commerce records, so ask for invoices that name the item.
Prepaid costs are another snag. On the accrual method, you deduct a prepaid expense in the years you get the benefit. On the cash method, the guide says you can’t deduct it if the benefit runs two or more years past the payment. A three-year software plan paid up front is the usual example.
Split personal and business spending from day one. A separate card for the shop makes every later step shorter, and it means the coffee you picked up at Timmies on the way to the post office doesn’t end up tangled in your shipping costs.
What should you do when you’re not sure?
Ask whether the cost helps earn income, whether it’s partly personal, and whether you’ll use it for more than a year. Yes to the first and no to the others usually means it’s an ordinary expense. A partly personal cost needs a business-use share. A multi-year asset likely goes through capital cost allowance. If you’re still stuck, a short chat with an accountant before you file is cheap next to a reassessment.
Where the numbers come from
The expense categories, the 50% meals rule, the list of items you can’t deduct and the prepaid rules come from the CRA‘s Guide T4002, Chapter 3. The $90,000 and $30,000 figures are examples, and the tax figures come from this site’s calculator using 2026 data for Ontario. I didn’t check provincial deductions or special rules for a corporation. Nothing here comes from a government body or speaks for one.
Frequently asked questions
Is shipping a deductible expense?
Yes. The CRA's Guide T4002 lists delivery and freight costs as deductible business expenses.
Can I deduct meals for my online business?
Only 50% of the lesser of what you spent and a reasonable amount, according to the CRA guide.
Can I deduct a laptop bought for the business?
Not in full. It's capital property, so you claim it over time through capital cost allowance.
Can I claim a home office?
Business-use-of-home costs are claimed on their own line, in proportion to business use.
Do I deduct GST/HST I paid?
If you claim an input tax credit on the expense, the CRA says to reduce the expense by that credit.
- 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