6 Tax Deductible Expenses Every Self-Employed Business Owner Should Know
If you’re self‑employed, you probably know that business expenses can reduce your tax bill, but knowing what you can deduct (and how) is where things can seem a bit confusing.
One of the most common issues I see when in my discussions with self employed business owners is not properly claiming expenses. There is a lot of conflicting information, and it is easy to be unsure about what actually counts as a legitimate deduction.
I have written a number of articles that outline key tax‑deductible expenses. In this post, I highlight ones that apply to many (if not most) self‑employed business owners, along with important rules and common misunderstandings to watch out for.
1. Home Office Expenses
If you work primarily from home and don’t have another office, you may be able to deduct home office expenses.
To simplify things (and avoid unnecessary complexity), I generally recommend having a space that is used exclusively for your business. This can be a separate room, or a clearly defined area within a room.
Once you’ve identified your workspace, you calculate:
The square footage of your office space
Divided by the total square footage of your home
That percentage is then applied to eligible home expenses, such as:
Rent
Utilities
Home insurance
Property taxes
Maintenance expenses
Mortgage interest (interest only — not principal)
It’s important to keep a simple schedule showing:
Your calculations
The percentage used
The expenses claimed
For unincorporated business owners, these expenses are reported on Form T2125 (Statement of Business Activities).
👉 You can read a more detailed breakdown of home office expenses here
2. Vehicle (Car) Expenses
Vehicle expenses don’t apply to everyone especially in the current business environment for so many of us that work online and meet with customers virtually. Tut for those who do use a car for business, this can be a significant deduction.
The key principle is the same whether you’re incorporated or unincorporated: Only the business‑use portion of your vehicle expenses is deductible.
To determine this, you should keep a mileage log that tracks:
Business kilometres driven during the year
Total kilometres driven during the year
Your business‑use percentage is calculated by dividing business kilometres by total kilometres.
You then apply that percentage to vehicle expenses such as:
Fuel
Insurance
Repairs and maintenance
Leasing costs or depreciation
If you’re incorporated, there are additional options (such as per‑kilometre allowances or having the corporation own the vehicle), but these come with additional considerations and potential taxable benefits.
Good record‑keeping is essential here, as mileage logs are commonly reviewed in audits.
For a more detailed analysis, check out my post on vehicle expense rules for both sole proprietors and incorporated businesses
3. Subscriptions, Software, and Professional Dues
Many self‑employed business owners overlook how quickly subscriptions and software costs add up.
Expenses in this category may include:
Accounting or bookkeeping software
Cloud storage (e.g. document management tools)
Design or marketing software
Professional association dues
Licenses required to operate your business
As long as these tools are used primarily for business purposes, they are generally deductible.
It’s a good idea to periodically review your subscriptions to ensure:
They’re still needed
They’re being claimed appropriately and relate to your business
For a more detailed analysis, check out my post on membership/subscription expenses that you can deduct
4. Phone and Internet Expenses
Phone and internet costs are often connected to home office expenses, but they are usually calculated separately.
Unlike home office expenses (which are based on square footage), phone and internet deductions are based on business usage.
For example:
You might use your internet 50% for business
Your phone usage percentage may be higher or lower
The important thing is to have a reasonable and supportable calculation. The percentages for phone and internet do not need to match your home office percentage.
Expenses may include:
Cell phone plans
Internet service
Video conferencing tools (e.g. Zoom)
5. Training, Courses, and Conferences
Training and education expenses are deductible when they relate to your current business.
Generally deductible:
Courses that improve or update existing skills
Training related to finances, marketing, technology, or operations
Short‑term workshops or professional development
However, there’s an important distinction to understand.
If a course is taken to acquire an entirely new skill set (for example, training for a new profession), the cost is not deducted immediately. Instead, it’s treated as capital property and written off over time through capital cost allowance.
Conferences have additional rules:
You’re generally limited to two conferences per year
The conference should be directly related to your business
It should not reasonably be available closer to home
For a more detailed analysis, check out my post on conference, course and training expenses for self employed small businesses.
Professional Fees
Professional fees are one of the most straightforward deductions.
These may include fees paid to:
Accountants or bookkeepers
Lawyers
Consultants or advisors
Translation services
For example, if you book a consultation with me it is tax deductible since it usually directly relates to your business.
Annual registration and filing fees required to operate your business are also deductible.
One Common Expense That Is Not Deductible
A common misconception is that clothing and personal grooming expenses are deductible if you use them “for business.”
In most cases, they are not deductible, including:
Everyday clothing
Haircuts
Makeup
Personal appearance costs
The main exception is a required uniform that is clearly identified with your business (for example, branded clothing with a logo).
Read more on why clothing expenses are not deductible
Final Thoughts
When claiming business expenses, it’s helpful to put on your “business hat” and ask:
Does this expense relate directly to my business?
Are there specific rules that limit or restrict this deduction?
You should absolutely claim all expenses you’re entitled to, but for areas like home office, vehicle, phone, and internet expenses, it is important to be reasonable. Taking a conservative approach reduces stress and being flagged by Revenue Canada.
Looking for support as a self-employed business owner?
If you’d like ongoing guidance, you can:
download one (or more) of my free resources
If you’re looking for deeper support, you can also join Ask Ronika which is a membership where you can ask questions, learn about small business finance, and be part of a supportive community.
