Self-Employed Tax Deductions in Canada: What Can You Claim?
You pay for supplies, cover the internet bill and buy the equipment you need to keep working. Then tax season comes and all those purchases are on the same card statement. Which ones belong on your return?
Tax return help if you work for yourselfIf you work for yourself in Canada, you can generally deduct reasonable day-to-day costs incurred to earn business income. Look at why you spent the money, how much of the purchase you used for work and whether it was something you’ll use for years. A single card statement can include all three kinds of costs.
What makes a purchase a business expense?
Think about a photographer getting ready for a client shoot. Paper and ink to print proofs are supplies used in the work. The internet bill covers delivering the files to clients as well as streaming at home. A camera will be used on shoots for years. Each transaction has a link to the work, but each raises a different tax question.
Costs like stationery and postage are common examples of day-to-day expenses. If they were reasonable and incurred to earn business income, they may be deductible. Paying for supplies with a personal card does not, by itself, change why you bought them. Paying with a business card does not turn a personal purchase into a business expense.
A photographer’s card statement
Three purchases, three ways to look at them
On the statement
Paper and ink, home internet, a camera
Supplies
Paper and ink for client work
A day-to-day cost that may qualify.
Shared bill
Home internet
Only the eligible work portion can count.
Equipment
A camera for future shoots
Separate capital rules apply.
The receipt tells you what you paid for. How you used it helps determine what can go on the return.
What if you use something for work and at home?
A home internet plan can cover client calls during the day and movies at night. For a shared cost like this, only the business share of an eligible expense can be claimed. The split needs a reasonable basis that reflects how you actually use the service.
Say the monthly bill is $100 and you can support 40% business use. The amount to consider for the return is $40. The other $60 is personal. If you used it differently, the split would change.
Illustrative example
How a $100 internet bill can split
Work use
40% of the bill
$40
This is the portion to consider for the return.
Personal use
60% of the bill
$60
This part stays out of the business expenses.
The 40% is an example. Use a reasonable split supported by your own circumstances.
Why is equipment treated differently?
A new camera used on client shoots may clearly be for work. It still differs from the paper and ink you use up as you go. A purchase that provides a lasting benefit can count as a capital asset. The cost of eligible equipment may be deducted over time through capital cost allowance, or CCA.
If you bought something substantial this year, note what it is and how you use it. An invoice for a piece of equipment is useful even if you don't yet know how much, if any, of the cost belongs in this year's return.
What helps when your receipts are scattered?
A bank statement may show who you paid and how much. The supplier’s invoice or receipt can show what the payment covered. When a receipt could describe work or personal spending, a short note about the job it was for can help later. CRA asks you to support expense claims with records such as invoices, receipts or other supporting documents.
At Anytime Accounting, we can review your income and expenses, separate work costs from personal spending and flag purchases that need a closer look. If you ask us to prepare the return, that review helps us see which costs have support and which ones need more information.
Have a few expenses you’d like to go over?
Tell us what kind of work you do and bring up a purchase you’re unsure about. The first consultation is free. We’ll discuss which records may help and agree on the scope of any tax return preparation or review.
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Official Canadian sources (6)
These CRA and Government of Canada pages are the primary sources used to check the tax information in this article.
This article is general information, not personal tax advice. Your situation may differ. For advice specific to you, book a free call.