If you’re a self-employed professional, contractor, consultant, creator, or gig-economy worker in Toronto, Scarborough, Markham, Mississauga, Brampton, Vaughan, Richmond Hill, North York, Pickering, Ajax, Whitby, Oshawa, Oakville, Burlington, or Hamilton, the right tax write-offs can lower your taxable income and stabilize cash flow. This guide explains what you can deduct, how to document it, and which tools keep everything clean for your T1 and T2125 Statement of Business or Professional Activities. You’ll find detailed sections, practical examples, a summary table, and FAQs about the tax write-offs available for self-employed individuals in Canada.
Why This Matters
Self-employed tax savings don’t come from tricks—they come from following rules consistently. That means: claim reasonable costs you incur to earn income, separate business vs. personal use, keep receipts and logs, and organize everything so a CRA reviewer can follow your story without guesswork. Do this and you’ll not only minimize tax; you’ll also see your numbers clearly—which helps with pricing, hiring, and growth.
What Counts as a Write-Off? (General Rules)
- Purpose: The expense must be reasonable and incurred to earn business income.
- Current vs. Capital: Routine costs are typically current expenses; long-lasting assets (e.g., computers, furniture, vehicles) are written off over time via CCA (Capital Cost Allowance).
- Business-Only Portion: If something is mixed use (phone, internet, car), deduct only the business percentage. Keep a simple calculation or log.
- Record-Keeping: Keep digital copies of invoices, receipts, contracts, bank/credit statements, mileage logs, and supporting schedules for six years after the end of the relevant tax year.
- GST/HST: If you’re registered, you may claim Input Tax Credits (ITCs) on eligible business purchases; otherwise, include the full cost including tax in your expense.
The Major Write-Off Categories (Detailed, with Practical Tips)
1) Business-Use-of-Home (Home Office)
What you can write off: A reasonable portion of home costs such as heat, electricity, home insurance, maintenance, property taxes, mortgage interest, and rent (for tenants).
How to calculate: Pro-rate by workspace area ÷ total home area, then adjust for time if you don’t use the space all year.
Special limits: These expenses cannot create or increase a business loss; unused amounts may be carried forward to a year with business income. If you claim CCA on your home, it can affect principal residence treatment when you sell—small businesses usually don’t claim CCA on the home portion for this reason.
Tools that help: Receipt-capture apps; a digital “home-office” worksheet stored with your T2125 files; cloud accounting to attach bills to entries.
2) Motor Vehicle Expenses
What you can write off: Fuel, insurance, license/registration, maintenance/repairs, leasing (subject to limits), interest on car loan (limits), plus CCA on eligible vehicles.
Proof you need: You can maintain either a full logbook or simplified logbook. Under simplified logbook, You can choose to maintain a full logbook for one complete year to establish a base year’s business use of a vehicle. After one complete year of keeping a logbook to establish the base year, you can use a three-month sample logbook to foresee business use for the entire year, as long as the usage is within the same range (within 10%) of the results of the base year. Businesses will have to show that the use of the vehicle in the base year remains representative of its normal use.
Passenger vehicle limits: CRA sets annual capital cost and lease limits for passenger vehicles; zero-emission vehicles use different CCA classes and limits. Check the current-year amounts before you buy or lease.
Tools that help: Mileage-tracker apps (e.g., Driversnote, MileIQ); cloud accounting rules to separate vehicle costs; a dedicated vehicle folder for insurance, loan/lease, and service records.
3) Meals & Entertainment (M&E)
What you can write off: Generally 50% of meals and beverages with a clear business purpose (client meeting, on-site work travel). Keep itemized receipts (not just credit-card slips) and note who/why. Long-haul truck drivers have a higher deductible percentage (special rule).
What not to do: Claiming family meals, celebrations, or routine staff lunches without a bona fide business reason.
4) Travel (Out-of-Town Work)
What you can write off: Airfare, accommodation, local transport, baggage, business-related tips, and 50% of meals while on bona fide business trips.
Proof you need: Itinerary, conference agenda, client emails, invoices—anything that proves purpose.
Tip: Combine with M&E rules and keep all documents together in a trip folder.
5) Advertising & Promotion
What you can write off: Digital ads (Search, Social, Display), sponsored posts, Canadian TV/radio/newspaper ads, business cards, promotional materials, and finder’s fees. Print periodicals have special Canadian content rules that can limit the deduction if editorial content is low—check before you buy.
Tip: Track campaigns to revenue where possible; this helps defend “reasonableness.”
6) Professional Fees & Dues
What you can write off: Accounting, tax preparation, legal fees, and professional association dues directly tied to your business.
Tip: Keep engagement letters and invoices together; your “year-end binder” should include these.
7) Insurance
What you can write off: Commercial general liability, professional liability (E&O), cyber, and business property insurance. Home insurance (pro-rated) is typically claimed under business-use-of-home.
Health/medical premiums: In some cases, Private Health Services Plan (PHSP) or Health Spending Account (HSA) arrangements can be deductible for self-employed or corporations when set up correctly. Rules are specific—get advice to ensure eligibility; otherwise, many individuals claim premiums as medical expenses (a credit) rather than a business deduction.
8) Supplies, Office Expenses, and Small Tools
What you can write off: Stationery, printer ink, shipping, packaging, small tools (many are fully deductible if under the small-tool threshold), and routine office items.
Capital vs. current: Larger, longer-lasting items (e.g., furniture) are usually capital and claimed via CCA.
9) Software & Subscriptions
What you can write off: SaaS subscriptions (project management, design suites, bookkeeping, CRM) as current expenses. Purchased software may be depreciated (some non-system software is often fully deductible in the year under a specific class).
Tip: Centralize billing (one card) to avoid missed receipts.
10) Rent, Utilities & Internet (Commercial Space)
What you can write off: Office/studio/shop rent, utilities, security, waste removal, and related occupancy costs for separate commercial premises. For a home office, use business-use-of-home rules instead.
Tip: Keep a copy of your lease and any CAM (Common Area Maintenance)/operating statements.
11) Phone & Data
What you can write off: Business portion of mobile plans and internet.
Proof you need: A simple percentage analysis (e.g., usage reports or a reasonable business-use estimate). Avoid writing off 100% unless truly business-only.
12) Bank Charges & Interest
What you can write off: Business bank fees, merchant fees, and interest on business loans/credit lines. Vehicle loan interest has special limits; keep loan agreements handy.
Tip: Use a separate business bank/credit card to preserve clean evidence.
13) Subcontractors & Casual Labour
What you can write off: Payments to subcontractors and freelancers directly tied to earning income.
Compliance tip: Issue information slips where required to CRA, and keep signed agreements and invoices to show the work was business-related.
14) Wages & Benefits (If You Hire Staff)
What you can write off: Gross wages, employer CPP/EI, vacation pay, and employer-paid benefits.
Compliance tip: Set up payroll correctly, remit on time, and keep ROEs and T4s organized.
15) Training, Conferences & Certifications
What you can write off: Courses, certifications, and conferences that maintain or improve skills used to earn income (registration, textbooks, course software; travel under travel rules).
Tip: Avoid “personal interest” courses—stick to directly business relevant training.
16) Bad Debts
What you can write off: Amounts you previously included in income that become uncollectible. Maintain collection notes and proof of attempts to collect.
17) Capital Cost Allowance (CCA)
What it is: The Canadian depreciation system. Rather than deducting the full cost of capital assets in one year, you claim CCA by class (rates prescribed by CRA).
Common classes (examples):
- Class 8 (20%) – office furniture/equipment not elsewhere classified.
- Class 50 (55%) – computer equipment and systems software.
- Class 12 (often 100%, half-year rule applies) – certain small tools and some non-system software.
- Class 10/10.1 (30%) – many vehicles; annual cost and lease limits apply to passenger vehicles.
- Class 54/55 (30%/40%) – certain zero-emission vehicles, with separate cost limits.
Tip: Keep a simple asset register (date, description, cost, class, CCA claimed, disposition).
GST/HST Considerations for the Self-Employed
- Registration: Mandatory once you pass the small-supplier threshold of $30,000; many register earlier to appear professional and recover ITCs.
- Regular vs Quick Method: The Quick Method simplifies filing for smaller registrants; you remit a reduced percentage of collected tax instead of claiming most ITCs (with certain credits). Check eligibility thresholds and rates, and model both methods to see which yields a lower remittance.
- Documentation: To claim ITCs under the regular method, keep valid invoices with the supplier’s details and taxes shown.
Summary Table — Self-Employed Tax Write-Offs (What to Claim, How to Prove It)
| # | Category | What You Can Deduct | Practical Solution (How to Do It Right) | Helpful Tools |
| 1 | Business-Use-of-Home | Portion of heat, electricity, insurance, property tax, mortgage interest, rent, maintenance | Measure workspace %, adjust for time; keep bills; do not use to create/increase a loss; carry forward unused | QBO/Xero; Dext/Hubdoc; a simple worksheet |
| 2 | Motor Vehicle | Fuel, insurance, maintenance, licenses, loan interest (limits), leasing (limits), CCA | Keep a full-year log once; use 3-month sample in later years; apply CRA vehicle limits; separate personal vs business | Driversnote/MileIQ; cloud accounting rules |
| 3 | Meals & Entertainment | 50% of business-purpose meals; special rule for long-haul truckers | Keep itemized receipts + “who/why”; avoid personal/family meals | Expensify; Dext |
| 4 | Travel | Airfare, hotels, local transport, baggage; 50% of meals | Keep itinerary/agenda/client emails; file trip folders with receipts | Cloud storage; Expensify |
| 5 | Advertising & Promotion | Digital ads, Canadian TV/radio/newspaper, business cards, promos | Track campaigns to revenue; check periodical content rules before print buys | Ad platforms exports; QBO/Xero classes |
| 6 | Professional Fees & Dues | Accounting/tax/legal fees, business association dues | Save engagement letters/invoices; file under year-end binder | PDF storage; e-signature |
| 7 | Insurance | Commercial, E&O, cyber; home insurance (pro-rated in home-office) | Keep policies in a “year-end” folder; review coverage annually | Document storage |
| 8 | Supplies & Small Tools | Stationery, packaging, small tools under threshold | Separate consumables vs capital; keep purchase details | QBO/Xero items; Dext |
| 9 | Software & Subscriptions | SaaS (current); certain purchased software (class rules) | Centralize billing; note software type (SaaS vs purchased) | App dashboards; QBO/Xero |
| 10 | Rent & Utilities (Commercial) | Office/studio/shop rent, utilities, security | Keep lease + CAM statements; reconcile monthly | Cloud storage; QBO/Xero |
| 11 | Phone & Internet | Business portion of mobile/data | Document % business use; avoid claiming 100% unless true | Carrier usage reports |
| 12 | Bank Fees & Interest | Bank charges, merchant fees, business loan interest | Use business-only accounts/cards; attach loan agreements | Bank feeds; Plooto |
| 13 | Subcontractors | Payments to independent contractors | Keep contracts/invoices; issue information slips where required | E-signature; contractor tracker |
| 14 | Wages & Benefits | Gross wages, employer CPP/EI, benefits | Set up payroll; remit on time; keep ROEs/T4s | Wagepoint/QB Payroll/ADP |
| 15 | Training & Certifications | Relevant courses, conferences, materials | Tie to current income; keep agendas and proof | LMS receipts; storage |
| 16 | Bad Debts | Specific receivables already included in income | Document collection attempts; write off when clearly uncollectible | A/R aging; notes |
| 17 | Capital Cost Allowance (CCA) | Annual depreciation by class (e.g., Class 8, 50, 10/10.1, 54/55) | Keep an asset register; apply rates/limits; keep invoices & disposition records | Fixed-asset register; accountant review |
Real-Life Examples (Clear & Relatable)
- Toronto graphic designer (home-office + software): Works from a dedicated 120-sq-ft room in a 1,200-sq-ft condo. We pro-rated heat, electricity, insurance, property tax, and mortgage interest by 10%, adjusted for the 11 months she operated. We did not claim CCA on the home to preserve principal-residence treatment. Her Adobe/Canva subscriptions were expensed; a new iMac went to Class 50 with CCA tracked in the asset register.
- Mississauga rideshare/contract driver (vehicle heavy): He started a full-year logbook, then moved to 3-month sample logs. Fuel, insurance, maintenance, wash, and a portion of phone data were claimed by business %. Also, checked vehicle CCA/lease limits before upgrading, preventing a deduction shortfall.
- Markham IT Consultant: Registered for HST once sales crossed the threshold. After modeling, the Quick Method reduced net remittances vs. regular method.
- Hamilton contractor (tools & subcontractors): Smaller consumables were expensed; bigger gear moved to Class 8. Subcontractor agreements were signed via e-signature; also, tracked invoices and issued slips where required. Result: clean T2125 schedules and smoother loan approvals.
FAQs – Self-Employed Business Tax Markham/Canada
1) What’s the difference between a current expense and a capital asset?
A current expense is a short-term cost that keeps your business running (e.g., supplies, software subscriptions). A capital asset provides lasting value (e.g., computers, furniture, vehicles) and is written off over time using CCA. When unsure, consider expected useful life: if it extends beyond a year, it likely belongs to capital.
2) Can I deduct 100% of my phone and internet?
Only if they are strictly business-only (rare). Most owners claim a reasonable business percentage. Document your basis (usage reports or a simple calculation) and keep it consistent.
3) Do home-office expenses create a loss if my year is weak?
No. Business-use-of-home costs cannot create or increase a business loss. Any unused amount is carried forward to a future year in which you have business income and still meet eligibility.
4) What vehicle proof do I need?
A mileage log that shows business km vs total km. Keep insurance, lease/loan documents, and service records. CRA accepts a full-year baseline log and, after that, sample logbooks if your usage remains within a reasonable range (usually, 10%).
5) Are all meals 50% deductible?
No. Meals must have a clear business purpose (client meeting, travel while working). Keep itemized receipts and notes. Certain occupations (e.g., long-haul truck drivers) have a higher allowable percentage.
6) What about digital advertising and social media spend?
Digital advertising directed to your market is generally deductible. Special content rules apply to print periodicals; digital platforms typically don’t have those print-specific limitations. Keep invoices and campaign reports.
7) Can I write off private health insurance?
Sometimes. PHSP/HSA arrangements can be deductible when set up correctly, particularly for corporations and certain self-employed situations. If you don’t qualify, premiums may still be eligible as medical expenses (a credit). Get tailored advice before assuming a deduction.
8) Do I need to register for GST/HST right away?
You must register once you exceed the small-supplier threshold of $30,000. Many owners register earlier to look professional and claim ITCs. If you register, choose between Regular and Quick Method and keep all supporting invoices.
9) How do I write off a bad debt?
You can deduct specific receivables that you already included in income when you determine they are uncollectible. Keep evidence (emails, statements, collection notes) showing your efforts and the decision date.
10) What’s the safest way to handle software and apps?
Treat SaaS as current expenses; purchased software may be capital depending on type. Keep clean invoices, use one company card for subscriptions, and reconcile monthly so nothing is missed.
11) Do I need separate bank/credit accounts?
Yes. Separate accounts make your audit trail crystal clear, reduce errors, and speed up your monthly close. They also help you see real profitability.
12) How long should I keep my records?
Keep all books and supporting documents for at least six years after the end of the tax year. Digital copies are fine if they’re clear, complete, and accessible.
Consult a Business Tax Accountant Markham to guide you the write-offs available in your self-employed business.
The best tax result isn’t a miracle at filing time—it’s the outcome of clean books, clear receipts, and consistent processes all year long. If your records can’t tell a simple story, the CRA will write one for you.
Schedule a Consultation for self-employed tax review with MAQ CPA firm’s business tax professional Markham. We’ll map your eligible write-offs, fix your home-office and vehicle documentation, so that your next tax season is calm, accurate, and optimized.
Disclaimer
The information provided in this blog is for general informational purposes only and does not constitute professional accounting, tax, financial, or legal advice. While we strive to ensure the accuracy and timeliness of the content, the information may not apply to your specific situation or reflect the most current legislative changes. Readers are strongly advised to consult a qualified professional before making any decisions based on the content of this blog. MAQ CPA and its representatives disclaim any liability for any loss or damage incurred as a result of reliance on any information provided herein.