Every legitimate deduction available on T2125 — home office, vehicle, phone, software, meals, professional fees, and capital cost allowance
Claiming every legitimate business expense is one of the most effective ways to reduce your tax bill as a Canadian freelancer. Business expenses reduce your net income on T2125, which reduces the income tax and CPP contributions you owe. The CRA allows deductions for expenses that are reasonable, incurred to earn business income, and supported by documentation. This guide covers every major expense category available to Canadian freelancers in 2025.
To be deductible, an expense must meet three tests: it must have been incurred to earn business income (not personal), the amount must be reasonable in the circumstances, and you must have documentation (receipts, invoices, bank statements) to support the claim. Mixed-use expenses (used for both business and personal purposes) are deductible only in proportion to business use.
If you work from home and have a dedicated workspace, you can deduct a business-use percentage of home operating costs. Calculate your business-use percentage as: workspace area ÷ total home area (or number of rooms used for work ÷ total rooms). The workspace must be used exclusively or primarily for business, or be where you principally meet clients.
| Home Expense | Deductible? |
|---|---|
| Rent | Yes — business % of monthly rent |
| Mortgage interest | Yes — business % of interest paid (not principal) |
| Property taxes | Yes — business % |
| Home insurance | Yes — business % |
| Heat and hydro | Yes — business % |
| Water | Yes — business % |
| Internet | Yes — business % (or 100% if primarily for work) |
| Cable TV | Only if required for business (e.g., media monitoring) |
| Home repairs and maintenance | Business % for general repairs; 100% for workspace-specific repairs |
| Building CCA | Caution — can affect principal residence exemption |
If you use a vehicle for business (client visits, project sites, supply runs), you can deduct the business-use percentage of all vehicle operating costs. Keep a mileage logbook to document business kilometres.
| Item | Treatment |
|---|---|
| Computer (over $500) | CCA Class 50 — 55% declining balance |
| Computer (under $500) | May qualify as Class 12 — 100% in year of purchase |
| Tablet, second monitor | CCA Class 8 (20%) or Class 50 (55%) |
| Printer, scanner | CCA Class 8 — 20% declining balance |
| Smartphone (primarily business) | CCA Class 8; or Class 12 if under $500 |
| Camera (for business content) | CCA Class 8 |
| Microphone, headset | CCA Class 8 or immediate expense if under $500 |
| Desk, office chair | CCA Class 8 — 20% (business use % if home office) |
Software used for business is fully deductible in the year of expense if it is a subscription (SaaS). Perpetual software licences may need to be capitalized under CCA. Common deductible software expenses:
Your phone plan and internet service are deductible to the extent used for business. If your phone is 70% for business, deduct 70% of your monthly plan. If internet is 60% for business, deduct 60%. Keep a reasonable basis for your business-use estimate — the CRA may ask how you calculated it.
Courses, workshops, conferences, and educational materials related to your current business are deductible. This includes online courses, industry conferences (registration + travel), professional books and subscriptions, and coaching or mentoring fees. Note: courses that qualify you for a new profession or trade (not your current business) are generally not deductible as business expenses — they may qualify as tuition credits instead.
Business meals and entertainment are deductible at 50% of the actual cost. To qualify, the meal must be with a client, prospect, or business associate, and the primary purpose must be business. Keep records of who attended, the business purpose, and the amount. Staff parties (up to 6 per year) may be 100% deductible.
Travel for genuine business purposes is deductible: flights, trains, hotels, ground transportation (Uber, taxis), and per diem meals while away from your regular place of business. Personal portions of mixed business/personal trips are not deductible. For conferences or client meetings in other cities, keep the business schedule and itinerary to document the business purpose.
Business insurance premiums are deductible: professional liability (E&O) insurance, commercial general liability, business interruption insurance, and commercial vehicle coverage. Personal life insurance premiums are generally not deductible as a business expense.
Stop paying bank fees on your hard-earned gig income. KOHO offers free banking with no monthly fees and no minimum balance. Use code 45ET55JSYA for a bonus when you sign up.
Open KOHO Free — Code 45ET55JSYA