The CRA allows self-employed individuals to deduct a wide range of expenses that are necessary for operating a business. It’s important to maintain detailed records and receipts to substantiate these expenses in case of an audit.

1. Business-Related Expenses

Advertising and Promotion

These are expenses related to promoting your self-employed business or freelance services. Some common examples include:

• Online Advertising: Costs associated with Google Ads, social media marketing, and other online campaigns to attract clients or customers.
• Print Advertising: Flyers, posters, business cards, or brochures.
• Marketing Materials: Design and printing of materials you use to promote your business, such as banners, ads, and websites.

These are fully deductible if the promotion directly relates to your business activities.

Business Supplies

Business supplies refer to the tools and materials you need to conduct your work. These can vary greatly depending on your line of work:

• Office Supplies: Pens, paper, folders, printer cartridges, staplers, etc.
• Specialized Materials: For example, if you’re an artist, you can deduct the cost of paints, canvases, brushes, etc.
• Stationery: Business cards, letterhead, and other stationery materials needed for communications with clients.

You can claim the full cost of supplies you use exclusively for business purposes.

Contract Labor

When you hire other self-employed individuals or subcontractors to assist you with your business, their payments are deductible:

• Subcontractors: Payment to external contractors who work for your business on specific projects (e.g., web developers, designers, or other freelancers).
• Freelancers: If you outsource some tasks to other freelancers (like content writers or graphic designers), you can deduct their fees as a business expense.

Be sure to keep contracts, invoices, and proof of payments for these services.

Insurance

Business-related insurance premiums can be deducted as business expenses:

• Liability Insurance: Protection for your business in case of accidents or damages.
• Professional Liability Insurance: Especially relevant for service professionals like consultants or architects to protect against malpractice claims.
• Property Insurance: If you own any business property, such as office equipment or inventory, this insurance is deductible.

Ensure the policies are explicitly for your business and not personal insurance.

Interest

Interest on loans taken out for business purposes is deductible:

• Business Loans: If you borrow money to finance your business (e.g., for purchasing equipment or inventory), the interest paid on that loan is deductible.
• Credit Cards: If you use a business credit card, you can deduct the interest on any outstanding balance that pertains to business expenses.

This does not include interest on personal loans used for business purposes—only those tied directly to your business.

Meals and Entertainment

You can deduct 50% of the cost of meals and entertainment when these expenses are directly related to your business activities. This includes:

• Client Meetings: Meals or refreshments you provide during business meetings or while entertaining clients or potential clients.
• Business Travel: Meals and entertainment costs while traveling for business purposes (only 50% is deductible).

Ensure the primary purpose of the expense is related to the business.

Office Supplies

Office supplies that you use exclusively for your business can be deducted:

• Paper, ink, pens, toner: Office consumables used in day-to-day operations.
• Printer and Office Equipment: If the equipment is for business purposes (computers, fax machines, photocopiers, etc.), you can deduct the cost.

Keep receipts and track all items that are used only for business purposes.

Professional Fees

You can deduct the costs of hiring professionals for services that relate directly to your business:

• Accountants: For bookkeeping, tax filing, and other financial services.
• Lawyers: Legal fees associated with contracts, legal advice, or protecting your intellectual property.
• Consultants: Fees paid to professionals who help improve or grow your business, such as marketing experts or management consultants.

Only deduct fees that are directly related to your business and necessary for its operation.

2. Vehicle Expenses

If you use a vehicle for business purposes, you can deduct a portion of your vehicle-related expenses. This can include:

• Fuel: The cost of gasoline used for business trips.
• Repairs and Maintenance: Costs associated with maintaining the vehicle, such as oil changes, tire replacements, and other repairs.
• Leasing or Financing Costs: If you lease or finance your vehicle, you can deduct the business-use portion of those payments.
• Insurance: The portion of your vehicle insurance related to business use.
• Depreciation (CCA): If you own the vehicle, you can claim depreciation over time using the Capital Cost Allowance (CCA).

You need to track the percentage of business use (e.g., if you use your vehicle 60% of the time for business, you can claim 60% of the vehicle-related expenses).

3. Travel Expenses

Travel expenses are deductible when the travel is for business purposes:

• Transportation: The cost of transportation for business travel, whether it’s airfare, train tickets, car rental, or public transit.
• Lodging: Hotel stays or accommodation expenses for business trips.
• Meals: Deduct 50% of meals incurred while traveling for business purposes.
• Other Travel Costs: Taxis, parking fees, and other necessary expenses incurred during business travel.

Keep all receipts, itineraries, and proof that the travel was for business.

4. Home Office Expenses

If you work from home, you can claim a portion of your home-related expenses:

• Rent or Mortgage Interest: If you rent your home or pay a mortgage, you can claim the portion of those costs related to your business space.
• Utilities: A percentage of utilities like electricity, water, heating, and garbage collection.
• Property Taxes: A portion of your property taxes based on the business area of your home.
• Home Insurance: If you have home insurance, you can claim the business-use portion of the premium.
• Repairs and Maintenance: Costs associated with maintaining the home office area (e.g., repairs, painting, etc.).

To calculate the percentage of home expenses you can claim, divide the area of your home office by the total area of your home.

5. Business Phone and Internet

You can deduct the portion of your phone and internet bills that relate to your business:

• Phone: If you have a separate business line, you can deduct the entire cost. If you use your personal phone for business, you can deduct the business portion of the phone bill.
• Internet: Similarly, if you use the internet primarily for business, you can claim the business-use portion of the internet bill.

Track the percentage of use for business versus personal use and apply that to the total bill.

6. Education and Training

If you take courses, seminars, or training that directly relates to improving your skills or knowledge for your business, those expenses are deductible:

• Course Fees: Tuition or fees for courses that are relevant to your business (e.g., online marketing for a digital marketing business).
• Books and Materials: If you buy books, software, or materials needed for these courses, those expenses are deductible.

You cannot claim personal development expenses that are not directly tied to improving your business skills.

7. Bank Charges

Banking fees related to your business accounts are deductible. This includes:

• Business Bank Account Fees: Monthly maintenance fees or transaction fees for your business bank account.
• Business Credit Card Fees: Interest and annual fees for credit cards used for business purposes.

These charges must be directly tied to your business operations.

8. Memberships and Dues

Membership fees for business-related organizations or professional associations are deductible:

• Professional Association Memberships: For example, if you are a member of a trade organization, a professional body, or a business network.
• Licenses: The cost of any licenses or permits required to operate your business.

These memberships must be necessary and relevant to your business activities.

Conclusion

If you work from home or use mixed-use assets (like a vehicle or phone), you’ll need to track the business-use portion of those costs. Always ensure that the expenses are directly tied to your business activities. If in doubt, consulting with a tax professional can ensure you’re claiming the appropriate deductions.