What Can I Deduct as a Canadian Freelancer?
One of the biggest advantages of being self-employed in Canada is deducting legitimate business expenses before paying tax. Every dollar deducted is a dollar the CRA doesn't tax. But most freelancers leave money on the table.
This guide covers every major expense category on Form T2125, the form all Canadian sole proprietors file at tax time.
The ground rule
CRA allows deducting any reasonable expense incurred to earn business income. Two conditions: must be for business purposes, and can only claim the business portion of shared expenses. Cannot deduct personal expenses or use them to create a loss beyond income.
Home office expenses
To qualify: home is principal place of business (more than 50% of work done there) or space used exclusively and regularly to meet clients.
Deduction calculated as percentage of home square footage — workspace area divided by total home area, applied to eligible expenses.
Eligible expenses: heat, electricity, home insurance, cleaning supplies, property taxes, rent. If you own, mortgage interest is deductible but not principal.
Phone and internet claimed separately on telephone and utilities line. Home office deduction cannot create or increase a business loss — unused amount carries forward.
Phone and internet
Deduct the portion used for business. 60% business use = deduct 60% of the bill. Applies to mobile and home internet. Keep monthly statements.
Software and subscriptions
Fully deductible if used to run the business — project management, design software, accounting software, cloud storage, video conferencing. Partly personal subscriptions: deduct business portion only.
Equipment and computers
Cannot deduct full cost in year of purchase — depreciated via Capital Cost Allowance (CCA). Computers fall under CRA Class 50, depreciating at 55% per year. Half-year rule in first year means 27.5% in year one. Keep purchase receipt, date acquired, and cost — needed every year CCA is claimed.
Advertising and marketing
Fully deductible: website costs, online advertising, business cards, social media ads, promotional materials. Website development costs may be treated differently if the site is a direct revenue source — consult a tax professional.
Meals and entertainment
50% of meals and entertainment expenses with a clear business purpose are deductible — client dinners, networking events, business lunches. Note on receipt: who was present and the business purpose. 50% limit is firm.
Professional fees
Fully deductible: accounting fees, bookkeeping fees, legal fees related to the business, tax preparation fees for the business return.
Vehicle expenses
If using personal vehicle for business travel, deduct the business portion of vehicle costs — gas, insurance, maintenance, registration, lease payments or CCA on the vehicle. Must keep a mileage log recording date, destination, purpose, and kilometres for every business trip. Without a log CRA will deny the claim.
Professional development
Courses, certifications, books, and industry conferences directly related to your field are deductible. Must relate to your current work — a graphic designer taking a design course is deductible; a freelance writer taking a cooking class is not.
What you cannot deduct
Common non-qualifying expenses: clothing (unless a required uniform or protective gear), personal meals, gym memberships, mortgage principal payments, fines and penalties, personal travel.
Keeping records
CRA requires all records and receipts for minimum six years from end of the applicable tax year. Digital copies acceptable. Every expense record needs: date, amount, supplier name and address, description of purchase. For shared-use expenses, document how the business portion was calculated.
NorthOS categorizes your expenses automatically
Every expense you log in NorthOS maps to the correct T2125 line — so at year end, your numbers are already organized exactly the way CRA expects them.
Try NorthOS free →Quick reference — most common T2125 deductions
| Expense | Notes |
|---|---|
| Home office (rent/utilities portion) | Must meet CRA workspace criteria |
| Phone and internet (business portion) | Claim business-use % only |
| Software subscriptions | Fully deductible if business use |
| Computer/equipment | Depreciated via CCA, not expensed in full |
| Advertising and website | Fully deductible |
| Meals and entertainment | 50% limit applies |
| Professional fees (accounting, legal) | Fully deductible |
| Vehicle (business km only) | Requires mileage log |
| Professional development | Must relate to your current work |
| Office supplies | Fully deductible |
This article is for informational purposes only and does not constitute tax advice. Tax rules can change — always verify with the CRA or a qualified tax professional before filing.