Top 10 Tax Deductions Every Self-Employed Canadian Should Know (2026)

Home office, car, phone/internet, startup costs, advertising, meals, PHSP health premiums, insurance, interest & more—learn the top 10 CRA-accepted deductions and how to document them.

Quick Overview (60 seconds)

Being your own boss in Canada is freedom—but it also means you’re responsible for your taxes. The easiest legal way to keep more of what you earn is to maximize eligible business expense deductions and document them properly.

The CRA generally allows self-employed individuals to deduct reasonable expenses incurred to earn business income, but you must claim only the business portion (especially for mixed-use costs like home, car, and phone). 

Why this topic gets searched so much: many people don’t realize home office costs, internet/phone, and part of vehicle expenses may be deductible—so they either miss deductions or claim them incorrectly and increase CRA risk.

The “CRA mindset” to stay safe and maximize deductions

1) Reasonable + income-earning purpose

For most deductions, your expense should be tied to earning business income and be reasonable in your situation. 

2) Mixed-use expenses must be prorated

Home, vehicle, phone, and internet often have personal use. The CRA expects you to claim only the business-use portion and support how you calculated it. 

3) You’ll report most of these on Form T2125

Self-employed individuals generally report business income and expenses using Form T2125. 

The Top 10 Tax Deductions (with practical examples)

1) Home Office Expenses (Business-Use-of-Home)

If you operate your business from home, you may deduct a portion of eligible household costs. CRA also limits business-use-of-home so it generally can’t create/increase a loss, but unused amounts can be carried forward when conditions are met. 

Common examples (depending on your situation):

• Rent (if you rent)

• Utilities (heat, electricity, water)

• Certain home insurance/property tax amounts as part of the home-office calculation (where applicable)

Simple way to calculate (typical approach):

• Workspace area ÷ total home area

• If the room is mixed-use, also apply a reasonable time-use allocation (CRA guidance references time-based allocation concepts). 

AMH tip: Keep a one-page “home office worksheet” in your files with your measurement method.

2) Motor Vehicle Expenses (and Business Travel by Car)

If you use a vehicle for both personal and business driving, you can deduct only the business portion—while business parking can be fully deductible in many cases. 

Deductible categories may include:

• Fuel/energy, insurance, maintenance/repairs, licence/registration, lease costs, interest (limits can apply), and more

The CRA expectation: keep records that support business vs total use (a mileage log). 

Fast example:
If you drove 20,000 km in the year and 6,000 km were for business, your deductible share is 30% of eligible vehicle operating costs (plus qualifying business parking). 

3) Business Start-Up Costs (Don’t Lose Track of Your “Pre-Launch” Spending)

New freelancers and contractors often spend money before “officially” starting—market research, initial branding, early professional fees, etc.

CRA emphasizes you must be clear about the date your business started, because deducting expenses depends on having carried on the business in the fiscal period the expense was incurred. 

AMH tip: Save a folder called “Start-Up Costs” and track what each cost was for. We’ll help you categorize what’s current vs capital.

4) Professional Fees (Accounting, Legal, and Consulting)

These are often some of the cleanest deductions—when they’re for business purposes.

CRA allows you to deduct external professional advice/services (including consulting), and it specifically includes accounting/legal fees for advice, record-keeping help, and preparing/filing income tax and GST/HST returns. 

5) Office Supplies, Software Subscriptions, Phone & Internet

This is where people either miss deductions or overclaim.

Office supplies (the “small stuff”)

CRA allows office expenses for small items like pens, paper clips, stationery, and stamps—while noting that desks/chairs and similar items are capital in nature. 

Phone, internet, and utilities (business portion only)

CRA allows telephone/utilities deductions when incurred to earn income, but warns not to deduct the basic monthly rate of your home phone (unless you have a separate business-only line). 

CRA also notes you can deduct the portion of cellular airtime that reasonably relates to earning your self-employment income, and that certain equipment purchases (like a computer/phone) are not deducted as a simple expense (often handled through CCA instead). 

AMH tip: Use a consistent business-use % for your cell/internet (e.g., based on work hours or data usage) and keep the method in your records.

6) Marketing & Advertising

Advertising is a straightforward way to reduce taxable income—as long as it’s actually business promotion.

CRA states you can deduct advertising expenses (including Canadian newspapers, TV/radio) and mentions restrictions for advertising in periodicals. 

Common modern examples:

• Google/Meta/LinkedIn ads

• Website hosting, domain fees, landing pages

• Business cards, signage, brand photography

7) Meals & Entertainment (Usually 50% Allowable)

CRA requires you to calculate the “allowable part,” and the limits generally apply to meals while travelling as well. 

Best practice: On the receipt (or in your bookkeeping app), record:

• who you met, where, date, and business purpose

8) Private Health Services Plan (PHSP) Premiums

If you’re self-employed and paying for health/dental coverage, PHSP premiums can be deductible if specific CRA conditions are met (and you can’t double-claim them as medical expenses). Canada

Important caution: CRA has warned that certain “health spending account” arrangements may not qualify as PHSPs in some sole-proprietor situations—so structure matters. 

AMH tip: Before you assume it’s deductible, verify it qualifies as a PHSP and that you meet CRA’s conditions.

9) Business Insurance

CRA allows commercial insurance premiums for buildings/machinery/equipment used in your business and clarifies where vehicle and home-workspace insurance should be claimed. 

Examples could include:

• General liability

• Professional liability (E&O)

• Coverage for business equipment

10) Interest & Bank Charges

If you borrow to operate or grow your business, the interest may be deductible.

CRA states you can deduct interest on money borrowed for business purposes or to acquire property for business purposes (with additional rules for certain fees and timing). 

AMH tip: Keep loan statements and a clear trace of how borrowed funds were used (business vs personal).

The Golden Rule: Keep Your Receipts (and keep them long enough)

CRA says you must support expense claims with receipts/invoices or other vouchers. 
For record retention, CRA guidance states you generally keep records for six years from the end of the last tax year they relate to, unless you have CRA permission to destroy earlier. 
CRA may also ask for proof beyond receipts (like bank statements or cancelled cheques). 

Simple system that works:

• One business credit card + one business bank account

• Monthly bookkeeping reconciliation

• Digital folder structure by year and expense type (home office, vehicle, advertising, etc.)

FAQ (10 Q&As)

1) Can I deduct home office expenses if I only use the room part-time?

Yes—business-use-of-home is typically based on a reasonable allocation (space and, when applicable, time-use) and is calculated using CRA guidance tied to the T2125 method. 

2) Can home office expenses create a business loss?

CRA states business-use-of-home is limited and generally can’t create/increase a loss, but unused amounts may be carried forward if conditions are met. 

3) Do I really need a mileage log for car expenses?

You should keep support showing business vs total use. CRA’s motor vehicle guidance emphasizes deducting only the portion related to earning business income and record support. 

4) Are business parking fees fully deductible?

CRA notes you can deduct the full amount of parking fees related to business activities. 

5) Can I deduct my home phone bill?

CRA says don’t deduct the basic monthly rate of your home phone, but business long-distance can be deductible, and a separate business-only line may be deductible. 

6) Is my cell phone and internet deductible?

Often yes—the business portion that reasonably relates to earning your self-employment income. 

7) Are meals with clients 100% deductible?

Usually not—CRA requires you to calculate the allowable part (commonly subject to the limit described in their meals/entertainment guidance). 

8) Is travel deductible if I go to a conference or out-of-town client work?

CRA states you can deduct travel expenses you incur to earn business/professional income (public transportation, hotel, meals), and notes the meals limit generally applies. 

9) Can I deduct PHSP premiums for health/dental coverage?

Potentially—CRA lists specific conditions for deducting PHSP premiums and warns against structures that don’t qualify. 

10) How long should I keep receipts and records?

CRA guidance states you generally keep records for six years from the end of the last tax year they relate to (unless CRA allows earlier destruction).

Final Note 

At AMH Chartered Professional Accountant, we help GTA businesses simplify corporate tax obligations, reduce risks, and take advantage of every tax-saving opportunity available.

📞 Call: 416-900-6079
📧 Email: info@amhtaxes.com
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