“Can I write this off?” sounds like a yes or no question.
Usually it is not.
For a self-employed Canadian, the important questions are what the expense was for, whether it was incurred to earn business income, whether there is a personal portion, whether the amount is reasonable, and whether the item is a current expense or capital property.
A deduction also does not mean the government gives you the purchase price back. A deductible expense generally reduces the business income on which tax is calculated.
That distinction alone clears up a lot of bad advice.
This article is general information, not tax or accounting advice. CRA rules can be detailed and your facts matter. Confirm significant claims with a qualified professional.
What business expenses can self-employed people claim in Canada?
The CRA lists many categories that may be considered when determining operating expenses, including:
- Advertising
- Business taxes, fees, licences and dues
- Delivery and freight
- Insurance
- Interest and bank charges
- Legal and accounting fees
- Maintenance and repairs
- Management and administration fees
- Meals and entertainment, subject to limits
- Motor vehicle expenses
- Office expenses
- Rent
- Salaries, wages and benefits
- Supplies
- Telephone and utilities
- Travel
The list does not mean every purchase in a category is automatically deductible.
The expense has to fit the tax rules and relate to earning business income. If something is partly personal, you generally need to separate the business portion.
Keep the receipt and enough information to explain the business purpose.
Can you claim your home office if you are self-employed?
The CRA says self-employed business-use-of-home expenses can be deductible if the workspace is your principal place of business, or if you use the space only to earn business income and use it regularly and on an ongoing basis to meet clients, customers or patients.
If you qualify, eligible costs can include a business portion of certain home expenses.
The CRA suggests using a reasonable basis such as the area of the workspace divided by the total area of the home.
For example, if a dedicated office is 120 square feet and the home is 1,200 square feet, the area basis is 10%.
If a room is used for both business and personal purposes, time can also matter. The CRA gives guidance for adjusting the calculation based on the hours the room is used for business.
If you rent your home, the business portion of rent and related eligible expenses may be deductible.
There are additional rules and limits. Business-use-of-home expenses generally cannot create or increase a business loss, although eligible unused amounts may be carried forward while the conditions continue to be met.
Can you deduct your entire internet and phone bill?
Not automatically if you use them personally too.
The business portion is what matters.
If your mobile phone is used 70% for business and 30% personally, claiming 100% without a supportable reason is difficult to justify.
Use a reasonable method and keep a note of how you arrived at the percentage.
A separate business line is easier because the purpose is clearer, but many freelancers reasonably use one phone for both.
The same logic applies to internet service and other mixed-use costs.
What vehicle expenses can a self-employed person claim?
The CRA lists potentially deductible motor vehicle costs including licence and registration fees, fuel or electricity, insurance, interest subject to applicable rules, maintenance and repairs, and leasing costs.
Capital cost allowance may also apply to an owned vehicle.
If the vehicle is used for both business and personal driving, only the business portion is relevant.
That means you need records.
Keep a log that supports business kilometres and total kilometres, along with receipts and other documents for the vehicle expenses being claimed. The exact record keeping approach should follow current CRA guidance for your situation.
Driving from one client site to another can be different from ordinary personal travel or commuting. Do not assume every kilometre driven on a workday is business use.
Are meals and entertainment 100% deductible?
Usually not.
The CRA says the maximum amount generally claimable for food, beverages and entertainment is 50% of the lesser of the amount actually incurred or an amount that is reasonable in the circumstances.
The 50% limit also generally applies to meals while travelling or attending conventions, conferences or similar events, although special rules and exceptions exist.
So if you spend $120 on an otherwise eligible client meal, the ordinary limit is generally based on $60, not $120.
Keep the receipt and note who attended and the business purpose. A credit card statement showing “Restaurant, $120” proves a payment occurred but does not explain why it was a business expense.
Can you claim coffee or lunch while working by yourself?
Buying something while you happen to be working does not automatically make it a business expense.
Your normal personal meals remain personal just because you answered email during lunch.
There are specific situations where food costs can qualify under tax rules, including eligible business travel and other circumstances, but “I was working when I ate it” is not a general test.
This is a good example of why business purpose matters more than the payment method.
Putting lunch on a business credit card does not transform the nature of the expense.
Can you claim a computer, camera or other equipment?
Possibly, but expensive equipment may be capital property rather than a current expense that is fully deducted in the year of purchase.
The CRA uses the capital cost allowance system for depreciable capital property. Different types of property can fall into different classes with specific rates and rules.
That means a $4,000 computer used in the business is not necessarily treated the same way as a $20 box of printer paper.
The distinction between a current repair and a capital improvement can also matter.
For meaningful equipment purchases, identify the item, purchase date, cost, business-use portion and tax treatment. Keep the invoice even after the year of purchase because property records can remain relevant in later years.
Can you deduct software subscriptions?
Software used to earn business income can fall within deductible business costs depending on its nature and the applicable tax treatment.
For ordinary recurring services, examples might include invoicing software, cloud storage, design tools, project management or web hosting used for the business.
Keep the supplier invoice, not only the credit card line.
If a service is billed in a foreign currency, retain enough information to support the Canadian dollar amount recorded in your books.
Large or unusual software acquisitions can have different treatment, so confirm anything that is not a routine operating cost.
Can you deduct clothing you wear for work?
Ordinary clothing is a classic area for overconfidence.
The fact that you bought a jacket for client meetings does not automatically turn it into a business deduction. Clothing can have personal use and tax treatment depends on the circumstances.
Specialised protective gear, uniforms or other items required for particular work can raise different considerations.
Do not use a social media list of “things entrepreneurs can write off” as your tax policy.
If an expense is inherently personal but you think your situation creates an exception, that is exactly the kind of claim worth confirming before filing.
Can you deduct your own labour?
No.
The CRA’s operating expense guidance states that you cannot deduct the value of your own labour.
If you spend Saturday painting your office, you do not create a $500 deduction by deciding your time was worth $500.
You may have deductible costs for eligible materials or paid services, depending on the circumstances, but your own unpaid labour is not an expense paid by the business.
This distinction also matters when you calculate job profitability. Your internal cost of time can be useful for management even though it is not the same thing as a tax deduction.
Is a job cost the same as a tax-deductible expense?
No, and this is an important distinction.
A job cost is a management concept. It tells you what a particular job consumed.
Suppose you invoice $5,000 for a project and record:
- $600 equipment rental
- $400 subcontractor
- $250 travel
- $1,200 internal labour cost for your own time
Those figures can help you understand whether the job was profitable.
But your internal value for your own labour is not suddenly a tax deduction. The CRA explicitly says you cannot deduct the value of your own labour.
Ledger lets you record cost against line items so you can see job margin. That is for understanding the economics of the work. Your tax return still needs to follow tax rules.
Keeping those concepts separate prevents a useful business metric from becoming a bad tax claim.
What records should you keep for business expenses?
Keep the document that shows what you bought, from whom, when and for how much.
For expenses where the business purpose is not obvious, add a note.
For mixed-use costs, keep the calculation supporting the business percentage.
For vehicle expenses, keep the required usage records.
For equipment, keep purchase and disposal information.
The CRA requires business records and supporting documents to substantiate claims, generally for six years from the end of the last tax year to which they relate, subject to exceptions.
See what records the CRA expects you to keep for the retention rules in more detail.
What expenses should you be most careful with?
Be especially careful when an expense is:
- Partly personal
- Large
- Unusual for your business
- Related to a vehicle
- Related to your home
- A meal or entertainment expense
- A long-lived asset
- Paid to a family member or related person
- Missing normal documentation
None of those automatically means the expense is invalid. They simply create more questions.
Good bookkeeping records the transaction. Good tax filing applies the correct rule to it.
Sources: Canada Revenue Agency on business expenses, types of operating expenses, running a business from your home, business-use-of-home expenses, motor vehicle expenses, and business records.