Every Tax Deduction Canadian Small Businesses Can Claim (2026)

Why This List Exists

Every dollar you do not deduct is a dollar you are donating to the CRA. That is not a figure of speech — it is math.

If you earn $80,000 in net business income and you are in the 29.65% combined marginal tax bracket in Ontario, every $1,000 in missed deductions costs you $296.50 in real money. Miss $5,000 and you just handed over $1,482 you did not owe.

This is the master list. Every deduction a Canadian sole proprietor or self-employed individual can claim, organized by T2125 line number, with CRA rules and calculation methods for each. Bookmark it, print it, and check it against your books before you file.

If you are a gig worker or delivery driver, we also have dedicated guides for Uber drivers and DoorDash/Uber Eats drivers with platform-specific details.

The Master Deduction Table

Here is every deduction at a glance. The sections below explain each one in detail.

That is $7,600 to $75,400 in potential deductions. Even if you only qualify for half of these categories, you are likely leaving thousands on the table.

T2125 Expense Categories at a Glance

For a full walkthrough of the T2125 form itself — every section, every part — see our step-by-step T2125 guide.

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Part 7: Business Expenses

Advertising and Promotion (Line 8521)

This covers everything you spend to attract customers and promote your business.

What you can deduct:

• Website hosting, domain registration, and design costs
• Google Ads, Facebook Ads, Instagram Ads, LinkedIn Ads
• Business cards, flyers, brochures, and signage
• Social media management tools (Hootsuite, Buffer, etc.)
• Trade show booth fees and promotional materials
• Sponsorships of local events
• Directory listings and online review platforms

CRA rules to know:

• Advertising to a Canadian audience in Canadian media is 100% deductible
• Advertising in non-Canadian media directed at the Canadian market is 50% deductible
• Advertising in foreign media directed at a foreign audience — still deductible if it generates business income you report on your T2125

Example: You spend $300/month on Google Ads targeting Canadian customers and $150/month on website hosting. That is $5,400 per year in fully deductible advertising expenses. At a 30% marginal rate, that saves you $1,620 in taxes.

Meals and Entertainment (Line 9060)

Business meals and entertainment are deductible at 50%. This means you claim the full amount on Line 9060 and the CRA automatically applies the 50% limit.

What qualifies:

• Meals with clients, prospects, or business partners where business is discussed
• Taking a client to a sporting event, concert, or show
• Team meals during business meetings or working sessions
• Tips and taxes on the above — they are included in the 50% calculation

What does NOT qualify:

• Your personal lunch eaten at your desk (unless you are travelling for business — see Travel below)
• Company parties or holiday events (these are 100% deductible, not 50% — different rule)
• Meals where no business discussion occurs

CRA documentation requirement: Record the date, location, who attended, and the business purpose. A credit card statement alone is not sufficient — you need the actual receipt plus a note about the business context.

Example: You take a client to dinner and the bill is $120 including tax and tip. You deduct $120 on Line 9060. CRA applies the 50% limit, so your effective deduction is $60. At a 30% rate, that saves you $18 on a single meal. Do this once a month and it adds up to $216 per year.

Office Expenses (Line 8810)

This is for consumable supplies and low-cost items used in your business operations.

What you can deduct:

• Paper, ink, toner, envelopes, and postage
• Pens, notebooks, sticky notes, and other stationery
• Software subscriptions under $500 per year (QuickBooks, Canva, Slack, Zoom, etc.)
• Cloud storage (Google Workspace, Dropbox, etc.)
• Cleaning supplies for your office

Where people get confused: If you buy a piece of equipment that costs more than $500 and has a useful life beyond one year — like a desk, chair, or monitor — that is a capital expense, not an office expense. It goes under CCA (Part 8), not Line 8810.

Example: You spend $50/month on software subscriptions (project management, invoicing, cloud storage) and $30/month on supplies. That is $960/year on Line 8810. Saves you $288 at a 30% rate.

Professional Fees (Line 8860)

Every fee you pay to a professional for business-related services is deductible.

What you can deduct:

• Accountant and tax preparation fees (yes, the cost of filing your T2125 is deductible)
• Bookkeeper fees — including AI bookkeeping tools
• Legal fees related to your business (contract review, business formation, disputes)
• Consulting fees for business advice
• Membership fees for professional associations required for your work
• Licence or certification renewal fees

What you cannot deduct here: Legal fees for personal matters, even if they indirectly affect your business.

Example: You pay an accountant $1,500 to prepare your return and $30/month for BookKeeper to manage your books. That is $1,860/year in professional fees. Saves you $558 at a 30% rate.

Telephone and Utilities (Line 9220 / Line 9281)

If you use your phone, internet, or utilities for business, you can deduct the business-use portion.

What you can deduct:

• Cell phone plan — prorated by business use percentage
• Internet service — prorated by business use percentage
• Business-only phone line — 100% deductible
• Landline if used for business calls — prorated

How to calculate the proration: Estimate the percentage of time you use each service for business. If you use your phone 60% for business, you deduct 60% of the monthly cost.

CRA tip: Be reasonable and consistent with your percentage. Claiming 90% business use on a personal cell phone invites scrutiny. Most self-employed Canadians claim 50-70% and that holds up well.

Example: Your cell phone costs $85/month and internet costs $75/month. At 60% business use, you deduct ($85 + $75) x 0.60 x 12 = $1,152/year. Saves you $345 at a 30% rate.

Travel (Line 9200)

Business travel is fully deductible when you travel away from your metropolitan area for business purposes.

What you can deduct:

• Airfare, train tickets, bus fares for business trips
• Hotel or Airbnb accommodation for business travel
• Meals while travelling — these get the 50% treatment on Line 9060, not here
• Car rental for business trips
• Taxi, Uber, or transit fares for business purposes
• Baggage fees, Wi-Fi on flights, and other incidental travel expenses
• Convention and conference registration fees (if directly related to your business)

What does NOT qualify:

• Your daily commute from home to a regular workplace
• Personal vacation days tacked onto a business trip
• Travel for a spouse or family member unless they have a legitimate business role

CRA documentation requirement: Keep your itinerary, boarding passes, hotel receipts, and a log of the business purpose of each trip.

Example: You attend two conferences a year — flights ($800), hotels ($1,200), and ground transport ($200). Total travel deduction: $2,200. Saves you $660 at a 30% rate.

Insurance (Line 8690)

Business insurance premiums are fully deductible.

What you can deduct:

• General liability insurance
• Professional liability (Errors & Omissions) insurance
• Product liability insurance
• Commercial property insurance
• Business interruption insurance
• Cyber insurance

What you cannot deduct here: Personal life insurance, personal health insurance, or personal auto insurance (the business portion of auto insurance goes under Vehicle Expenses in Part 9).

Example: E&O insurance at $1,200/year and general liability at $600/year = $1,800 deducted. Saves you $540 at a 30% rate.

Interest and Bank Charges (Line 8710)

Any interest or banking fee related to your business is deductible.

What you can deduct:

• Interest on business loans and lines of credit
• Interest on a business credit card (only the portion used for business expenses)
• Monthly bank account fees for your business account
• Payment processing fees (Stripe, Square, PayPal merchant fees)
• Wire transfer fees, overdraft fees on business accounts
• Interest on money borrowed to earn business income

What you cannot deduct: Interest on personal loans, personal credit cards, or your mortgage (unless you claim home office — see Part 10).

Example: Business bank account at $15/month + payment processing fees averaging $50/month + $200/year in credit card interest = $980/year. Saves you $294 at a 30% rate.

Delivery, Freight, and Express (Line 8631)

If you ship products to customers, every shipping cost is deductible.

What you can deduct:

• Canada Post shipping and postage
• Courier services (FedEx, UPS, Purolator)
• Packaging materials (boxes, tape, bubble wrap, labels)
• Freight charges for large shipments

Example: An e-commerce seller spending $400/month on shipping deducts $4,800/year. Saves $1,440 at a 30% rate.

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Part 8: Capital Cost Allowance (CCA)

Capital Cost Allowance is how you deduct the cost of significant assets — equipment, computers, furniture, and vehicles — that have a useful life beyond one year. Instead of deducting the full cost in the year you buy it, CCA spreads the deduction over multiple years based on the asset class.

However — and this is the part most people miss — the Immediate Expensing rules introduced in recent years let you deduct up to $1.5 million in eligible capital purchases in the year you buy them. This is massive. It means most small business owners can write off their entire equipment purchase in Year 1.

Key CCA Classes

The Half-Year Rule

In the year you purchase an asset, CCA is calculated on only 50% of the net addition. This is the half-year rule. If you buy a $2,000 laptop (Class 50 at 55%), your first-year CCA would be $2,000 x 50% x 55% = $550.

Exception: If you qualify for immediate expensing, the half-year rule does not apply. You deduct the full amount.

Immediate Expensing ($1.5M Limit)

Canadian-controlled private corporations (CCPCs) and eligible individuals can immediately expense up to $1.5 million in eligible capital property per year. For most small businesses, this means you can deduct the entire cost of your computer, furniture, or equipment in the year you purchase it.

Example: You buy a $3,000 laptop, a $1,500 desk setup, and a $500 monitor. Under immediate expensing, you deduct $5,000 in Year 1. At a 30% rate, that saves you $1,500 in the year you buy them — instead of spreading the deduction over 5-10 years.

For the detailed walkthrough of how to fill in Part 8 of your T2125, see our T2125 form guide, Part 8 section.

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Part 9: Vehicle Expenses

If you use a personal vehicle for business — driving to client meetings, picking up supplies, making deliveries — the business-use portion of your vehicle costs is deductible. This is one of the largest deduction categories for gig workers and consultants.

What Vehicle Expenses You Can Deduct

How to Calculate Your Business-Use Percentage

Business-use % = Business kilometres / Total kilometres x 100

Example: You drove 35,000 km total in the year. 21,000 km were for business purposes (client visits, supply runs, deliveries). Your business-use percentage is 60%.

If your total vehicle expenses for the year were $9,000, your deduction is $9,000 x 60% = $5,400.

The Mileage Logbook Requirement

The CRA requires a logbook to support your business-use claim. For each business trip, record:

• Date of the trip
• Destination
• Purpose of the trip
• Number of kilometres driven

You must keep a full logbook for at least one complete year. After that, you can keep a simplified logbook for three months and use it to establish a base year — but the first full year is mandatory.

CCA vs. Lease vs. Loan for Your Vehicle

For Uber and delivery drivers, vehicle expenses are typically the single largest deduction. See our dedicated guides for Uber drivers and DoorDash/Uber Eats drivers for platform-specific calculations.

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Part 10: Home Office Expenses

If you work from home, you have two methods to claim a home office deduction. Choose the one that gives you the larger number.

Method 1: Detailed Method (Percentage of Home)

Calculate the percentage of your home used for business, then apply that percentage to your eligible home expenses.

How to calculate the percentage:

Home office % = Office square footage / Total home square footage x 100

Eligible expenses you apply the percentage to:

• Rent (or mortgage interest — but NOT principal payments)
• Property taxes
• Utilities (heat, electricity, water)
• Home insurance
• Maintenance and repairs (common areas — not personal rooms)
• Internet (if not already claimed under Telephone & Utilities)

Example: Your home is 1,200 sq ft and your office is 180 sq ft. That is 15%.

At a 30% marginal rate, that $4,482 deduction saves you $1,344 in taxes.

Method 2: Flat Rate Method ($2/Day)

If tracking actual expenses feels like too much work, the CRA offers a flat rate of $2 per day for each day you worked from home, up to a maximum of $500 per year (250 working days).

Who should use this: If your rent is low, your office is small, or you do not want to track individual receipts. For most self-employed Canadians paying market rent, the detailed method produces a significantly higher deduction.

Who should NOT use this: Anyone paying more than $600/month in rent with at least 10% of their home used for business. The detailed method will almost always beat $500.

For a full walkthrough on home-based businesses, see our guide to starting a home-based business in Canada.

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Commonly Missed Deductions

These are the deductions most self-employed Canadians forget to claim. Every one of them is legitimate.

Professional development and education:

• Online courses related to your business (Udemy, Coursera, LinkedIn Learning)
• Books, audiobooks, and trade publications
• Industry conferences and seminar registration fees
• Certification and continuing education costs

Bank and payment processing fees:

• Monthly fees on your business bank account
• Stripe, Square, and PayPal transaction fees (often 2.9% + $0.30 per transaction)
• Currency conversion fees on business transactions
• NSF fees on business accounts

Business use of personal vehicle:

• Even if you only drive for business occasionally — client meetings, supply runs, bank visits — that mileage is deductible
• Parking at client sites, business meetings, and job sites

Professional and union dues:

• Mandatory professional association membership (law society, CPA, engineering)
• Union dues required for your employment or contract work
• Industry association fees

Bad debts:

• Invoices you sent, recorded as income, but were never paid
• You must have made reasonable efforts to collect before writing them off

Moving expenses:

• If you moved at least 40 km closer to a new business location, your moving costs are deductible

Workspace in the home for employees who also freelance:

• If you have a day job AND a side business, your home office deduction applies to the side business income on your T2125

Most of these are small individually — $200 here, $500 there — but they add up. A freelance consultant who claims professional development ($1,500), bank fees ($300), business parking ($600), and professional dues ($800) just found $3,200 in deductions they would have otherwise missed. That is $960 in tax savings.

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What You CANNOT Deduct

Not everything is fair game. Claiming ineligible expenses triggers CRA reviews and penalties. Here is what to avoid.

Personal expenses disguised as business:

• Personal groceries, clothing, or grooming (unless you wear a uniform with your business logo and it is not suitable for everyday wear)
• Personal vacations, even if you "thought about work" while there
• Gifts to family or friends (unless they are genuinely clients)

Commuting:

• Driving from your home to a regular place of business is a personal commute, not a business trip
• Exception: If your home IS your principal place of business, driving from home to a client site IS business travel

CRA penalties and interest:

• Late filing penalties, interest on unpaid tax, and GST/HST penalties are not deductible. They are the cost of being late, not the cost of doing business.

Political contributions:

• These get a separate tax credit — they are not a business deduction

Life insurance premiums:

• Personal life insurance is not deductible (some group plans through a corporation may be)

Club memberships:

• Golf club, gym memberships, social clubs — CRA specifically disallows these, even if you use them to network

Clothing:

• Regular business attire (suits, shoes, shirts) is not deductible. Only protective clothing, safety gear, or branded uniforms that cannot be worn outside of work qualify.

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How BookKeeper Helps You Claim Every Deduction

The reason most self-employed Canadians miss deductions is not ignorance — it is disorganization. You know you can deduct your phone bill, but you forget to separate business use. You know meals are 50% deductible, but you lose the receipt. You know your mileage counts, but you do not keep a log.

BookKeeper solves this by auto-categorizing every expense into the correct T2125 line as transactions flow in. Scan a receipt and it is mapped to Line 8810 (office expenses) or Line 9060 (meals) automatically. Import your bank statement and each transaction is sorted into the right deduction category.

When tax time arrives, you are not guessing. You have every deduction organized by T2125 line number, receipts attached, and totals calculated. Hand it to your accountant or plug it into your tax software. That is how you claim every dollar you are entitled to.

For tips on keeping your books clean year-round, see our bookkeeping cleanup guide and our year-end tax checklist for self-employed Canadians.

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FAQ

Can I deduct my laptop?

Yes. A laptop used for business is deductible. If it costs under $500, you can claim it as an office expense on Line 8810. If it costs more, it goes under CCA as Class 50 (55% rate). Under the immediate expensing rules, you can deduct the full cost in Year 1 — up to the $1.5 million limit. If you use it for both personal and business purposes, deduct only the business-use percentage.

What about meals — when are they deductible?

Meals are deductible at 50% when they have a clear business purpose — client meetings, business discussions, meals while travelling for business. Your personal lunch is not deductible. Always record who attended and what business was discussed. See our complete T2125 guide for how to report meals on your return.

Do I need receipts for everything?

The CRA requires documentation for every expense you claim. For most expenses, you need the receipt showing the vendor, date, amount, and items purchased. For meals, you also need a note about the business purpose and attendees. Credit card statements support your claims but are not sufficient on their own. The six-year retention rule applies to all records. Consider scanning receipts as you get them — paper fades, digital does not.

Can I deduct my phone?

Yes, the business-use portion. If your monthly phone plan costs $85 and you use it 60% for business, you can deduct $51/month ($612/year) on Line 9220. Be realistic about your percentage — CRA auditors flag claims of 90%+ business use on a personal phone.

What if I work from home?

You can deduct a portion of your home expenses — rent, utilities, insurance, internet — based on the percentage of your home used as an office. Calculate the square footage of your workspace divided by the total square footage of your home and apply that percentage to eligible costs. Or use the flat rate of $2/day up to $500/year if you prefer simplicity. For most people paying rent in a Canadian city, the detailed method saves significantly more. See our home-based business guide for the full calculation.

How much can I claim for vehicle expenses?

There is no fixed cap on vehicle expense deductions — it depends on your actual costs and your business-use percentage. If your vehicle costs $10,000/year and you use it 70% for business, you claim $7,000. The CRA does cap specific components: lease payments at $900/month and loan interest at $300/month for the business-use portion. The key requirement is a mileage logbook. Without it, CRA will deny the deduction entirely. Our guides for Uber drivers and gig workers cover vehicle tracking in detail.

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The Bottom Line

The tax code is not working against you. It is a rulebook — and the rules say you can deduct every legitimate business expense on this list. The problem is not that deductions are hard to find. The problem is that they are easy to miss when your books are a mess.

Get your bookkeeping organized. Use this list as your checklist. File your T2125 with every line filled in correctly. And stop donating money to the CRA that belongs in your pocket.

For step-by-step filing instructions, read our complete guide to filing taxes as a self-employed Canadian. For a month-by-month approach to tax preparation, follow our year-end tax checklist. For GST/HST questions, see our complete GST/HST guide. And if your books need work before you can claim any of this, start with our bookkeeping cleanup guide.