If you earn self-employment or business income, Form T2125 is used to report business or professional activities on your federal return. Organize your income records and supporting receipts using the categories below.
Reasonable expenses incurred to earn business income may be deductible. Separate personal costs and identify the business share of mixed-use expenses. Your adviser will confirm the treatment that applies to your circumstances.
Standard operating expenses
Keep receipts and a summary for each category that applies to your business.
- Advertising
Online ads such as Google or Meta, website hosting and design, business cards, flyers and print ads targeting Canadian markets. Some advertising and website costs have special treatment.
- Meals and entertainment
Business meals with clients or prospects. The allowable amount is generally limited to 50% of the lesser of the actual cost and a reasonable amount, subject to exceptions.
- Office expenses
Recurring software subscriptions (SaaS), cloud storage and business apps. Separate purchases of equipment or long-term software for review.
- Office stationery and supplies
Pens, paper, ink, envelopes and postage.
- Professional fees
Legal, bookkeeping and tax-preparation fees, including CPA fees. Keep accounting-software invoices with your records and avoid counting them twice.
- Management and administration fees
Business bank charges and payment-processing fees, such as Stripe or PayPal transaction fees.
- Interest charges
Interest on money borrowed for business purposes, including a business line of credit. Separate interest from principal repayments and other financing charges.
- Insurance
Commercial liability, professional indemnity (errors and omissions) and business-property insurance.
- Rent
Rent for an office, studio or retail space outside your home.
- Repairs and maintenance
Minor repairs to business equipment or commercial premises. Do not include the value of your own labour.
- Salaries and wages
Gross employee pay and the employer’s share of CPP or QPP contributions and EI premiums. Include reasonable wages actually paid to family members for work performed.
- Business taxes, licences and dues
Municipal business licences, annual business-registration fees and professional-association dues.
- Travel expenses
Public transit, airfare, hotels, taxis and rideshares for business travel. Identify any personal portion; business meals remain subject to their own limits.
- Telephone and utilities
Business telephone, internet and utility costs. Identify only the business-use portion and separate home-office costs.
- Delivery, freight and express
Shipping, courier and postage costs for products or documents sent to clients.
- Bad debts
Client amounts previously included in income that became uncollectible during the year. Keep records supporting the amount and collection efforts.
Motor vehicle expenses
Keep a mileage log showing total kilometres and business kilometres, with the date, destination and purpose of business trips. Identify the business-use share of these costs:
- Fuel and oil
Gasoline or electricity used to operate the vehicle, and oil.
- Insurance
Vehicle-insurance premiums.
- Maintenance and repairs
Servicing, oil changes and repairs.
- Licensing and registration
Vehicle licence and registration fees.
- Leasing
Lease payments, subject to applicable limits.
- Loan interest
Interest paid on a vehicle loan, subject to applicable limits.
- Business parking
Keep parking receipts for business activities separately. Eligible business parking is claimed separately from the mileage-based share; parking fines are not deductible.
Business-use-of-home expenses
The workspace must be your principal place of business, or be used only to earn business income and regularly and continuously to meet clients, customers or patients. Calculate a reasonable business share using the workspace area, and account for time spent on personal use where applicable.
- Rent
Rent paid if you lease your home.
- Utilities
Heating, electricity and water.
- Home insurance
Home-insurance premiums relating to the eligible workspace.
- Property taxes
Property-tax statements for your home.
- Mortgage interest
Mortgage statements separating interest from principal. Principal repayments are not deductible.
- Maintenance and cleaning
Eligible home maintenance and cleaning supplies, allocated appropriately.
Home-office expenses cannot create or increase a business loss. Keep unused amounts for your adviser to review for a possible carry-forward.
Capital property and capital cost allowance
Keep invoices for long-term assets such as laptops, furniture, cameras and vehicles separately from operating costs. Capital cost allowance (CCA) generally spreads deductions across years using asset classes and rates. Special first-year or immediate-expensing rules may apply to eligible property; your adviser will confirm the class, timing and permitted claim.
Costs to exclude
Keep personal and non-deductible costs out of your business-expense totals, including:
- Personal clothing
Ordinary clothing and standard business attire.
- Fines and penalties
Traffic tickets, parking fines and late-filing tax penalties.
- Your own labour
The value of your time spent on repairs or other work.
- Personal memberships
Personal gym memberships and recreational-club dues.
Discuss with your adviser
- What industry or type of work does your business involve?
- Do your records separate business and personal use of your vehicle, home and other shared expenses?